India’s services sector experienced a slight easing in growth in May, but still recorded the second-strongest rate of expansion in nearly 13 years, according to a monthly survey. The seasonally adjusted S&P Global India Services PMI Business Activity Index dropped from 62 in April to 61.2 in May. However, despite the decline, the latest reading indicated that output increased at the second-fastest pace since July 2010.
The survey revealed that the headline figure remained above the neutral 50 thresholds for the 22nd consecutive month, signaling expansion in the sector. The Purchasing Managers’ Index (PMI) considers a print above 50 as indicative of expansion, while a score below 50 denotes contraction.
Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, highlighted the resilience of demand, impressive output growth, and job creation within India’s dynamic service sector as demonstrated by the PMI data for May.
The survey also found that companies expanded their workforces to accommodate the higher volume of new work. Services companies expressed an optimistic outlook, anticipating increased business activity over the next 12 months. Factors such as advertising, demand strength, and favorable market conditions were cited as reasons for their positive forecasts.
In terms of the composite output index, which measures combined services and manufacturing output, the S&P Global India Composite PMI remained unchanged at 61.6 in May compared to April.
However, the survey noted that Indian service providers faced higher costs for food, input materials, transportation, and wages in May. In response to rising cost burdens, firms increased the prices of their services. Although these price increases could potentially affect the affordability of services and dampen economic growth, companies may be seeking operational efficiencies and exploring alternative sourcing options to navigate these challenges.
Looking ahead, the Monetary Policy Committee (MPC) of the Reserve Bank of India is scheduled to meet from June 6 to 8. After the last MPC meeting in April, the RBI maintained the repo rate at 6.5 percent, pausing its rate hike cycle. Policymakers will closely monitor inflation developments, indicating that interest rate cuts, which could support business strategies, budgeting, and investment plans, may be further delayed.
The S&P Global India Services PMI is compiled by S&P Global from responses to questionnaires sent to a panel of approximately 400 service sector companies. The panel represents different sectors and company sizes based on their contributions to GDP. The survey has been conducted since December 2005.
