Service activity rises to 60.5 in June on spate of fresh orders, growth in overseas sales

service activity picks up

India’s services sector activity reached 60.5 in June, recovering from a five-month low of 60.2 in the previous month, on the back of a rise in new orders and expansion in international sales, according to a private survey released on July 3.

The HSBC India Services Business Activity Index has stayed above 60-mark since the start of 2024.

“Activity growth in India’s service sector accelerated in June, with the index rising by 0.3ppt to 60.5, led by an increase in both domestic and international orders,” said Pranjul Bhandari, chief India economist at HSBC.

Better demand conditions also helped firms step up hiring. The pace of employment generation rose to the fastest level in nearly two years.

“Anecdotal evidence highlighted a mixture of short-term and permanent hires for junior, medium and senior level positions,” said the report.

Labour additions did lead to a heavier cost load on firms, but input inflation softened to a four-month low.

Moreover, only 5 percent of services firms passed on the costs to clients, leading to a moderate rate of charge inflation.

“Overall, service providers remain confident about the year-ahead business outlook, although the level of optimism moderated sharply during the month,” Bhandari noted.

The sentiment declined to an 11-month low over concerns surrounding market uncertainty and competition.

The 400 services firms surveyed for the index noted a further rise in export orders, with growth coming from Asia, Australia, Europe, Latin America, the Middle East and the US.

Services exports climbed nearly 5 percent in FY24 to $341.1 billion, even as goods exports were a tad below the FY23 levels. The services exports are likely to rise further this year and the government is aiming at a level of $1 trillion by 2030.

In an NCAER event on July 2, IMF chief economist Pierre-Olivier Gourinchas noted that India’s services exports will likely provide a cushion for the economy in an increasingly fragmented world.