India's services sector expands at fastest pace in 12 years in February

India’s services activity expanded at its fastest pace in 12 years in February on the back of strong demands as price pressures eased, an industry survey showed.

S&P Global India Services Purchasing Managers’ Index (PMI) rose from 57.2 in January to 59.4 in February, the highest level since February 2011.

The February index level indicates a sharp expansion in output. New orders placed with service providers rose further during the month, with several firms suggesting that competitive pricing boosted sales.

PMI index above 50, marks expansion in the sector. Services sector has posted positive growth for 19 months in a row, the longest stretch of expansion since June 2013.

Consumer services was the best-performing area in February, registering the fastest increases in new orders.

The sharp expansion in services activities came on the back of easing inflationary pressure in the sector. The rate of input price inflation moderated to a 29-month low in February.

“Services companies were often able to leave their average fees unchanged amid retreating cost pressures,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

Companies commonly cited higher food, material, transportation and wage costs. While consumer services topped the rankings for input costs, the sharpest rise in output charges was seen in transport, information and communication sectors.

Only 4 per cent of services companies transferred cost increases to their clients, while the vast majority opted to leave selling prices unchanged. Subsequently, the overall rate of charge inflation eased to the lowest level in a year.

There was only a marginal increase in job creation in the month as the vast majority of survey participants reported no change in staff levels from January. Among them, there were mentions that capacities were broadly adequate for current requirements.

“It seems that hiring growth was also dampened by a lack of confidence in the business environment,” De Lima noted in the report.

The degree of optimism recorded in February was the lowest for seven months and below the historical trend as some companies doubted demand would remain this resilient. Others displayed concerns surrounding fierce competition for new work, she added.