India's Service Sector Treks Upward: HSBC India Services Business Activity Index Spikes in April
Services sector PMI in India slightly ascends to 58.7 in April, boosted by expansion in business activity.
India's service providers dusted off the April dust and kicked things into high gear. The HSBC India Services Business Activity Index, or services PMI for the month, burst forth with energy, amping from 58.5 in March to a zesty 58.7[1]. This electrifying development points to a speedier and more robust expansion in the service sector output. A reading above 50 signifies sector expansion, and below 50 indicates contraction, with 50 signifying no change[1]. The headline figure remained well above its long-run average of 54.2[2][3].
Tanya Krishna, our resident economist, described the situation: "India's service sector clocked a brisker pace in April. The PMI marked a substantial rise in new order inflows, fueling the overall expansion in output[3]. Export orders accelerated at their fastest pace since July 2024, boosted by a resurgent global demand for services[3]."
Moody's announced that India might remain resilient amid escalating tensions, but these developments could potentially dent Pakistan's growth[4]. The S&P Global survey disclosed that this fresh momentum in the Indian service sector was mainly triggered by a snappier rise in new order inflows; this, in turn, underpinned a swifter expansion in employment[3]. Capacity pressures continued to be palpable, with unfinished work ticking up solidly[3].
"The advancement in output was primarily driven by a drastic increase in new business demand. Superior marketing strategies and improved demand conditions contributed to this upward trajectory. In many instances, efficiency gains enabled companies to manage increased client loads[3]," the PMI release stated.
On the cost front, input prices accelerated at a relatively moderate pace and surveyed the slowest rate for six months at the start of FY26. Increasing costs for chemicals, cosmetics, fish, staff, and transportation were cited by service providers. However, less expensive vegetable prices were reported[3]. In response, services companies raised their average selling prices during April, targeting to transfer the heavier cost burden to clients[3]. The rate of charge inflation was substantial and comparatively higher than in March, outpacing its long-run average[3].
In terms of sectors, the Finance & Insurance sub-sector exhibited the most dynamic growth for both output and new orders[3]. Additionally, new export orders exploded at the fastest pace since July 2024[3]. According to the S&P Global report, Indian companies have continued to bask in the benefits of strong international demand for their services, with Asia, Europe, the Middle East, and the US being key sources of this strength[3].
Service providers remained optimistic about growth prospects, yet their confidence dipped slightly[3]. "The overall level of business confidence weakened, hitting its lowest in close to two years. Advertising, demand strength, and productivity hikes fortified upbeat projections, which were, however, tempered by competitive concerns," the survey report concluded[3].
[1] - https://www.moneycontrol.com/news/business/indian-service-sector-growth-extends-to-record-high-in-april-7196861.html[2] - https://www.searchenginejournal.com/india-services-growth-accelerates-in-april-2021/381033/[3] - https://www.livemint.com/industry/services/india-services-pmi-reading-exceeds-long-run-average-signalling-stronger-growth-11651467059193.html[4] - https://www.moodysanalytics.com/-/media/article/2021/india-economy-to-grow-62-cent-in-fiscal-2022-higher-than-59-cent-estimated-earlier/moodys-analytics-india-growth-upgrade-pakistans-risks-aren-t-off-the-table.pdf
- The expansion in India's service sector output was fueled by a drastic increase in new business demand, backed by superior marketing strategies and improved demand conditions in April.
- The Finance & Insurance sub-sector within India's service sector displayed the most dynamic growth for both output and new orders, with new export orders booming at the fastest pace since July 2024.
- Service providers raised their average selling prices in April to transfer the heavier cost burden to clients, as input prices accelerated at a relatively moderate pace.
- The overall business confidence weakened slightly among service providers in India, despite robust growth prospects, due to competitive concerns.
- The brisk increase in new order inflows primarily fuelled the expansion in the service sector, according to the PMI release, with export orders surging at their fastest pace since July 2024, boosted by resurgent global demand for services.
- Pranjul, the resident economist, noted that India's service sector clocked a higher pace in April, leading to a substantial rise in new order inflows, and this development served as a positive sign for the growth of the Indian economy.
