The Indian service sector witnessed faster growth last month buoyed by strong domestic demand and a significant rise in export orders, according to latest industry data. The HSBC India Services Purchasing Managers' Index showed an improvement in business activity in June against the previous month.
The PMI, which has remained above the 50-mark indicating expansion for over three years now, rose to 60.5 in June from 60.2 in May. A reading above 50 separates growth from contraction. Chief economist noted that growth was led by a rise in both domestic as well as international new orders during the month under review.
Significantly, the latest data revealed the sharpest increase in foreign orders for Indian services in almost a decade showcasing the improving competitiveness of the sector globally. As the seventh largest services exporter, this bodes well for the overall economic growth outlook of the country. Job additions were also at the strongest pace since August 2022 demonstrating improving business confidence.
While input costs rose at a slower rate offering some relief on inflation, continued strong demand allowed companies to pass on most of the cost burden to customers through price hikes. The broader composite index, which combines both manufacturing and services, matched preliminary estimates at 60.9 showing resilience across sectors.
Going forward, though optimistic sentiment remained, concerns over market uncertainties could impact the momentum to some extent. Sustained policy support will be crucial to build on strengths while addressing challenges for India's large services industry to sustain this growth trajectory.
