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India’s service sector output grows at second fastest pace in nearly 13 years in May: PMI

A man walks between buildings in a shopping mall in New Delhi, India. Reuters file

According to a monthly survey released on Monday, despite a slight slowdown in growth in May due to favorable market conditions and the acquisition of new customers, India’s service sector saw its second growth in nearly 13 years.

The S&P Global India Services PMI Business Activity Index fell from 62 in April to 61.2 in May after adjusting for seasonal variations. The most recent measurement showed output grew at the second-fastest pace since July 2010, although down from April.

The overall figure was above the neutral level of 50 for the 22nd consecutive month. A score above 50 on the Purchasing Managers Index (PMI) indicates expansion, while a number below 50 indicates recession.

“The May PMI data provides compelling evidence of resilient demand, impressive output growth and job creation in India’s dynamic services sector,” said Pollyanna De Lima, associate director of economics at S&P Global Market Intelligence.

In addition, the organizations monitored have increased their workforce to meet the increase in the number of new jobs.

Looking ahead, service organizations are optimistic about expanding business activity over the next 12 months.

“Publicity, strength of demand and favorable market conditions were among the reasons given for the optimistic outlook,” the survey said.

Meanwhile, the S&P Global India Composite PMI Output Index – which measures the combined output of services and manufacturing – came in at 61.6 in May, unchanged from April.

“India’s private sector built on the strong momentum recorded in April by posting a rate of expansion in business activity that was the best in just under 13 years,” the survey said.

On the price side, Indian service providers reported rising costs for feed, inputs, transportation and wages in May. Amid reports of rising costs, companies charged more for their services in May.

“While continued increases in production loads could erode purchasing power, affect service accessibility and potentially impede economic growth, companies could seek operational efficiencies and explore alternative supply options to overcome these challenges. “Lima said.

A meeting of the six-member Monetary Policy Committee (MPC), headed by Reserve Bank Governor Shaktikanta Das, is scheduled for June 6-8. The decision of the 43rd meeting of the MPC would be announced on June 8.

After the last MPC meeting in April, the RBI halted its rate hike cycle and stuck with the repo rate of 6.5%. Previously, the central bank had cumulatively increased the repo rate by 250 basis points since May 2022 in an effort to contain inflation.

“With policymakers closely watching inflation developments, long-awaited interest rate cuts that could help business strategies, budgeting and investment plans seem more distant,” Lima said.

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 is stratified by detailed sector and firm employment size, based on contributions to GDP. Data collection began in December 2005.

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