India's services sector growth slightly better in April on new order inflows

New Delhi: India's service sector activity accelerated slightly in April largely driven by a quicker increase in new order inflows, which also underpinned a faster expansion in employment, a monthly survey said on Tuesday.

The seasonally adjusted HSBC India Services PMI Business Activity Index reached 58.7 in April, up from 58.5 in March, indicating a sharp and stronger expansion in service sector output.

The headline figure was above its long-run average of 54.2.

In the Purchasing Managers' Index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction.

"India services activity rose at a faster pace than last month. New export orders gained momentum after taking a breather in March, accelerating at its fastest pace since July 2024," Pranjul Bhandari, Chief India Economist at HSBC, said.

The overall expansion in output was fuelled by a significant rise in new business intakes, the joint-best in eight months, with many firms noting favourable demand conditions and successful marketing efforts.

Moreover, Indian companies continued to benefit from improved international demand for their services, with Asia, Europe, the Middle East, and the US particularly cited as sources of strength. Overall, new export orders expanded at the fastest pace since July 2024.

A quicker increase in new order inflows led Indian services companies to increase their workforce numbers for the thirty-fifth consecutive month in April.

Panelists enhanced operational capacity with full- and part-time employees to capitalise on increased client demand, the survey said.

On the pricing front, Indian services firms increased their average selling prices during April, as they sought to transfer higher cost burdens to clients. "The rate of charge inflation was solid, faster than in March and above its long-run average," the survey said.

"Margins improved as cost pressures eased and prices charged rose at a faster pace," Bhandari said.

On business outlook, service providers expressed optimism regarding activity growth, but they downgraded expectations.

The overall level of business confidence was at its lowest in close to two years. Advertising, demand strength, and productivity gains underpinned upbeat forecasts, which were nevertheless dampened by competition concerns.

"Though firms remained optimistic about future growth, their confidence waned slightly," Bhandari noted.

Meanwhile, private sector sales and output ticked higher in April. The HSBC India Composite PMI Output Index rose from 59.5 in March to 59.7 in April.

Composite PMI indices are weighted averages of comparable manufacturing and services PMI indices. Weights reflect the relative size of the manufacturing and service sectors according to official GDP data.

According to the survey, new business volumes across the private sector rose at the fastest pace in eight months, helped by a pick-up in growth across the service economy. The upturn in goods producers was broadly similar to March.

Both manufacturing firms and their services counterparts registered faster expansions in new export orders. At the composite level, the rate of growth was at a nine-month high, the survey noted.

The HSBC India Services PMI is compiled by S&P Global from responses to questionnaires sent to a panel of around 400 service sector companies.