Services sector growth remains strong in May; record increase in employment

New Delhi: India’s services sector growth rose marginally in May when compared with the previous month led by a substantial jump in exports to other Asian countries, North America and Europe, as per an industry survey report released by S&P Global on Wednesday.

India’s Purchasing Managers’ Index (PMI) for services rose to 58.8 in May from 58.7 in the previous month. Rate of expansion in new business and activity in May was little-changed from those seen in the prior three months.

“Strong international demand continued to fuel services activity, as evidenced by the new export business index’s uptick from April,” said Pranjul Bhandari, Chief India Economist at HSBC.

International demands recorded strongest improvement in 19-and-a-half years of PMI services data collection for India by S&P Global.

The latest results also revealed a fresh record-rise in employment, as firms continued to adjust operating capacities in line with ongoing increases in sales.

“To keep up with swelling demand, India’s service providers heavily increased staff recruitment. Indeed, the employment index rose to the highest reading ever recorded by this survey,” said Bhandari.

To accommodate for ongoing expansions in new business intakes, service providers continued to recruit additional staff. Almost 16% of the surveyed companies reported higher payroll numbers, while 1% indicated a fall. The data is based on a survey conducted among around 400 services companies spread across the country.

There was a recovery in business sentiment during May, with the overall level of confidence rising from April's 23-month low. Upgraded forecasts stemmed from expectations that greater staffing capacity, expanded clientele and marketing initiatives will support activity growth in the year ahead, S&P Global noted in the monthly survey report.

Meanwhile, strong demands and fresh addition of workforce led to a jump in both input and output prices.

“The increase in workforce numbers, coupled with overtime payments, added to firms' cost burdens. Some companies also cited greater outlays on cooking oil, material and meat,” the rating agency said.

The overall rate of inflation edged above the series average and was the highest since the start of the current calendar year, it added.