India's services sector growth accelerated to a five-month high in April, driven by strong domestic demand, according to a private survey released on Wednesday. The S&P Global India Services Purchasing Managers' Index (PMI) rose to 61.7 in April from 61.2 in March, signaling a faster expansion in business activity. A reading above 50 indicates expansion, while below 50 denotes contraction.
Domestic Demand Fuels Growth
The uptick was primarily attributed to robust domestic demand, which helped offset a slight slowdown in new export orders. The survey noted that new business inflows increased at the strongest pace since January, with panelists reporting improved market conditions and successful marketing efforts. The rate of job creation also remained solid, with firms adding staff to meet rising workloads.
Input Costs and Pricing
On the price front, input cost inflation eased to a three-month low, while output charges rose at a softer pace. This suggests that margin pressures may be moderating. However, some firms reported higher costs for food, fuel, and staff, which could impact future pricing decisions.
Business Confidence
Business sentiment improved to a three-month high, with firms expressing optimism about future growth prospects. The positive outlook was supported by expectations of sustained demand, new client wins, and planned expansions. The composite PMI, which combines manufacturing and services, also rose to 62.1 in April from 61.8 in March, indicating the strongest expansion in three months.
Economic Implications
The strong services sector performance underscores the resilience of India's economy amid global headwinds. The services sector accounts for over half of India's GDP, and its sustained expansion bodes well for overall economic growth. The survey data aligns with other indicators showing robust domestic demand, driven by urban consumption and government infrastructure spending.
Expert Insights
Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said, "The Indian services sector started the new fiscal year on a strong footing, with business activity expanding at the fastest pace since November 2023. The latest PMI data highlighted an acceleration in growth, driven by the domestic market, as new export orders expanded at a softer pace." She added that the rise in business confidence and sustained job creation were positive signs for the near-term outlook.
Conclusion
Overall, the April PMI data paints a picture of a robust services sector, with strong domestic demand driving growth. While external demand showed some moderation, the domestic market remains resilient. The easing of input cost pressures and improved business confidence provide further support for the sector's continued expansion in the coming months.
