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The Indian services sector saw its highest growth in ten months in June, driven by a sharp upturn in new business, according to the seasonally adjusted HSBC India Services PMI. The index surged to 60.4 in June, up from 58.8 in May, signaling robust expansion in economic activity, as per The Hindu.
Strong Domestic and Export Demand Boosts Growth
The PMI’s new business sub-index also jumped significantly in June, reflecting strong domestic demand and rising international orders. Services firms across sectors — including financial services, information technology, logistics, and hospitality — reported a sharp uptick in client activity. Export orders grew slightly slower but remained strong, with higher demand from Asian, Middle Eastern, and US markets.
Employment Continues to Rise, Though Hiring Pace Slows
Despite the acceleration in services activity, the pace of job creation slowed modestly from May’s peak. However, June still marked the 37th consecutive month of employment growth in the services sector. Companies cited the need for skilled staff to manage new projects and client deliveries, ensuring that employment continues to support the broader economic recovery.
Easing Inflationary Pressures Improve Margins
Input cost inflation cooled to a ten-month low in June, with rising wage costs being the main contributor. With slower price increases in other inputs, output price inflation also eased, helping firms protect and slightly expand profit margins. Businesses reported being able to pass on part of the cost burden to clients without harming demand.
Composite PMI Shows Broad-Based Expansion
The HSBC India Composite PMI, which includes both services and manufacturing, climbed to 61.0 in June, a 14-month high. This suggests that the overall private sector — including factories and service providers — is experiencing the fastest growth since April 2024. Manufacturing PMI also picked up in June, reinforcing the picture of a synchronised economic upturn.
Business Confidence Softens Slightly
Despite strong activity, business confidence across the services sector dropped to its lowest in over two years, with some firms expressing skepticism about the sustainability of the current demand trend. Concerns over global economic headwinds, geopolitical tensions, and looming interest rate changes dampened optimism.
Policy and Economic Implications
The sustained rebound in services growth supports expectations of a softening of inflation, bolstering the case for the Reserve Bank of India to cut benchmark interest rates within the coming months. Strong services performance reinforces India’s GDP outlook, which is increasingly being driven by consumption and exports as manufacturing recovers.
However, policymakers will be alert to the recent dip in business confidence; ensuring sustainable growth will require steady demand, stable global trade, and infrastructure investment.
Outlook for the Next Quarter
If the current momentum holds, India’s growth trajectory looks promising. Services are expected to remain a primary engine of expansion, supported by rising online commerce, fintech, tourism, and logistics. Export orders and domestic consumption will continue to play central roles, while inflation moderation may give consumers and businesses more spending power.
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