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Services activity growth in November hits three-month high on strong demand

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The PMI showed foreign demand rose for the first time since the start of the pandemic. (Case)

Bengaluru:

Services activity in India grew at its fastest pace in three months in November on strong demand, pushing optimism to its highest level in eight years, according to a business survey, which also showed that prices have risen at the fastest rate since July 2017.

The S&P Global India Services Purchasing Managers’ Index rose to 56.4 in November from 55.1 in October, beating a Reuters poll estimate of 55.4.

It remained above the 50 mark separating growth from contraction for a 16th consecutive month, its longest stretch of expansion since October 2016.

“Indian service providers continued to reap the benefits of strong domestic demand, with PMI data for the penultimate month of 2022 showing faster increases in new business and production,” noted Pollyanna De Lima. , Associate Director of Economics at S&P Global.

“Furthermore, expectations of buoyant demand in the medium term have supported the creation of additional jobs.”

Official data released last week showed pent-up demand for services helped private consumption grow 9.7% a year last quarter, helping Asia’s third-largest economy grow 6.3% over the last quarter. of the period.

However, growth is generally expected to slow in the coming quarters as high interest rates hamper economic activity.

The PMI showed that foreign demand rose for the first time since the start of the pandemic, an encouraging sign given that the slowdown in global growth has already started to hurt exports, which fell 17% ago. one year in October.

Strong demand propelled business confidence to its highest level since January 2015.

However, high input prices have forced companies to increase invoice prices at the fastest rate in about five and a half years.

This could put further pressure on headline inflation, which hit a three-month low of 6.77% in October but remained above the Reserve Bank of India’s tolerance limit.

“Evidence of persistent inflation could prompt further policy rate hikes at a time when global economic challenges could negatively impact India’s growth,” De Lima added.

The RBI, which has already raised policy rates by 190 basis points since May, will raise the repo rate by 35 basis points to 6.25% on Wednesday and to a peak of 6.50% at the end of March, according to a Reuters report. . survey.

A stronger expansion in services activity, coupled with better-than-expected manufacturing growth, propelled the composite index to a three-month high of 56.7 in November, from 55.5 in October.

(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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