India’s services PMI increased to 59.8 in May, up from 58.8 in April, driven by rising demand for various services like freight, digital solutions, e-commerce, entertainment, and IT. This surge in demand led to a growth in new business, prompting companies to expand their operations and hire more employees. Despite high cost pressures in India’s service sector, they eased to a four-month low, resulting in a moderate increase in selling prices, the softest since January, as per the PMI data.
Pranjul Bhandari, Chief India Economist at HSBC, noted that the services PMI indicated a business activity expansion in May, supported by a continuous increase in new business. Additionally, external demand for Indian services also grew at a faster pace, bouncing back from a sharp decline in April. The data revealed that new orders placed with Indian service providers saw a significant rise, marking the most substantial increase in six months during the first fiscal quarter.
Furthermore, the data showed a rise in new export business, although to a lesser extent compared to total sales. Notably, international orders expanded solidly, with firms benefiting from markets like Australia, Canada, France, Germany, Hong Kong, Malaysia, the UAE, and the UK. Despite an increase in selling prices, the demand for Indian services improved, with the rate of charge inflation easing to a four-month low, aligning closely with its long-run average.
Indian services companies reported a further increase in payroll numbers, with a solid rate of job creation, the second-fastest in nearly a year. However, only a small percentage signaled greater hiring, while the majority indicated no change in headcounts.
