India's services sector growth hits 4-month high in Dec on new biz orders, easing price pressures

New Delhi: Growth in the services sector, which accounts for more than half of the Indian economy, jumped to a four-month high in December led by strong demand, especially in finance and insurance sectors, as per an industry survey report released by S&P Global on Monday.

India’s Purchasing Managers’ Index (PMI) for services rose to 59.3 in December from 58.4 recorded in November. A PMI print above 50 indicates growth in the sector while below 50 shows contraction.

“Forward-looking indicators such as new business and future activity suggest that the strong performance will likely continue in the near future,” said Ines Lam, Economist at HSBC.

Buoyant underlying demand was identified by companies as the primary factor behind output growth. Not only did new orders increase for the 41st month in a row, but also to the greatest extent since August 2024.

Finance and insurance sectors registered by far the strongest increases in both new orders and business activity at the sub-sector level.

On the price front, there was a softer increase in cost burdens, though the surveyed companies reported higher outlays on food, labour and materials. Selling price inflation eased in December after rising to a 15-month high in November.

“The easing of input price inflation in the month also supported business sentiment. Strength in the services PMI stands in contrast with the growing signs of a slowdown in the manufacturing industry,” Lam said.

India’s manufacturing PMI had slipped to a 12-month low in December dragged by weak demands, as per the data last week.

The overall level of positive sentiment for services fell from November’s six-month high, but remained above its long-run average. Expanded capacities, new customer enquiries and budget allocation towards marketing were some of the tailwinds cited by firms. Service providers remained confident that output would increase over the course of the coming 12 months.

The rate of employment growth softened from November, but was sharp and among the strongest seen since data collection began in December 2005. “The combination of new business growth, upbeat forecasts and rising capacity pressures supported another round of job creation across the service economy,” S&P Global noted.