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India Services Growth Strongest Since November 2021

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India’s service sector growth expanded at the strongest rate since November last year amid strong growth in output and demand, while rising inflationary pressures damped business confidence.

The services Purchasing Managers’ Index rose to 57.9 in April from 53.6 in March, survey results from S&P Global showed on Wednesday. Any score above 50.0 indicates expansion in the sector.

New business inflows and output increased at the strongest pace since November last year due to higher bookings after the easing
of Covid-19 pandemic-related restrictions and favorable demand
conditions.

The selling prices rose in April, with the rate of charged inflation highest in nearly five years. The overall rate of inflation was the second-strongest since the survey began.

The outstanding business continued to increase and employment rose for the first time since November last year.

International demand continued to decline since the onset of Covid-19 in March 2020 and new orders from abroad decreased at the quickest pace since September last year.

“Consumer services and finance & insurance were the top-performing areas of the service economy, while Real Estate & Business Services was the only sub-sector to post contractions in sales and output,” Pollyanna De Lima, economics associate director at S&P Global, said.

The composite output index that combines the performance of manufacturing and services, rose to 57.6 in April from 54.3 in the previous month. This was the fastest pace of growth in five months.

Looking ahead, inflationary pressures triggered by the global surge in commodity prices and supply bottlenecks due to the war in Ukraine are likely to damp activity in coming months.

The Reserve Bank of India raised the key policy repo rate by 40 basis points to 4.50 percent in a surprise move on Wednesday, citing acute inflationary pressures.

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