News Brief

India’s Service Sector Growth Speeds Up In June Amid Robust Export Orders And Hiring Surge

Bhuvan Krishna

Jul 03, 2024, 04:37 PM | Updated 04:37 PM IST

Services sector. (Representative Image)
Services sector. (Representative Image)

India's services industry has registered increased pace of growth last month, driven by strong demand and a record increase in export orders, according to a report by The Economic Times.

The report also mentioned that companies were hiring at the fastest rate in nearly two years as strong demand encouraged service providers to recruit more staff.

HSBC's India Services Purchasing Managers' Index (PMI), compiled by S&P Global, has risen to 60.5 in June from 60.2 in May, aligning closely with the Reuters poll median forecast of 60.6 and a preliminary reading of 60.4.

The PMI has remained above 50, the threshold separating growth from contraction, for nearly three years.

"Activity growth in India's service sector accelerated in June, led by an increase in both domestic and international new orders," noted Pranjul Bhandari, chief India economist at HSBC.

New business, a key indicator of demand, has been above breakeven since August 2021 and expanded at a faster pace last month. This expansion was supported by the fastest rise in international orders since the sub-index was introduced to the survey nearly a decade ago.

This is positive news for India's economic outlook, as the country is already the seventh-largest services exporter globally.

Meanwhile, costs rose at the slowest pace in four months, indicating cooling inflation.

The report also noted that fewer than 5 per cent of firms surveyed chose to pass cost burdens to clients, resulting in only a moderate rate of charge inflation.

The Reuters poll found that inflation is likely to fall below the mid-point of the RBI's medium-term target of 4 per cent this quarter but is expected to rise in the next one. Nonetheless, the central bank is anticipated to cut interest rates to 6.25 per cent towards the end of the year.

A rise in both manufacturing and services pushed the overall HSBC India Composite PMI to 60.9 last month, matching the flash estimate, up from 60.5 in May.

Bhuvan Krishna is Staff Writer at Swarajya.

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