Services sector gets off to a slower start in FY25

New Delhi: The pace of India’s services sector growth declined in April month-on-month due to a moderation in export orders, an industry survey conducted by S&P Global showed on Monday

Purchasing Managers’ Index (PMI) for services declined to 60.8 in April from 61.2 recorded in the previous month. Despite the decline, the growth in the sector remains one of the fastest in 14 years.

Domestic demand. remained robust. However, there was moderation in export orders. ”Although new export orders remained robust, they showed a slight moderation from March figures,” said Pranjul Bhandari, Chief India Economist at HSBC.

Despite the decline, export orders in April were the second-fastest increase recorded in 10 years. Growth in services exports remained robust to Asia, Africa, Europe, the Americas and the Middle East.

“Still, total new orders continued to rise at a stronger rate than exports. The upturn in overall sales was sharp, well above its long-run average and among the strongest in 14 years,” S&P Global noted in the monthly report.

Business activity increased across the four sub-categories monitored by the survey, led by steep growth in finance & insurance.

The services PMI data is based on a survey of around 400 services sector companies. The sectors covered include consumer (excluding retail), transport, information, communication, finance, insurance, real estate and business services. PMI reading above 50 indicates growth in the sector while below 50 shows contraction. The PMI print has been above the 50-mark since August 2021.

As per the report, inflationary pressure remained high in April due to higher input and labour costs.

Bhandari said the higher input costs resulted in squeezed margins for service firms, as only part of the price rise was passed on to clients through output charges. The consumer services segment witnessed by far the sharpest increase in input costs.

The rate of job creation in April was marginal and softer than that seen in the previous month. Only a few service providers showed an increased appetite for new hires in April. A majority of the companies indicated that payroll numbers were sufficient for current requirements.

Business confidence among service providers remained robust. “Overall confidence among service providers for the year-ahead outlook improved markedly, bolstered by resilient demand conditions. In terms of overall activity, aggregate output across both the manufacturing and service sectors rose significantly in April,” said Bhandari.