India's Services Purchasing Managers' Index (PMI) for December 2024 increased to 59.3 points, up from 58.4 in November, indicating growth in the services sector. This rise was driven by strong demand, which fueled new business inflows, supported output growth, and led firms to expand their workforce, according to the HSBC India Services PMI report compiled by S&P Global on Monday.

The HSBC India Services Business Activity Index climbed to 59.3 in December, marking the strongest growth in four months, the report stated.

Demand as Key Driver for Growth

Sustained demand was identified as the key factor behind the output growth, with new orders increasing for the forty-first consecutive month. Companies attributed this growth to efforts aimed at expanding their capacity, allowing them to handle more work. The finance and insurance sectors led the growth in services, recording the highest increase in new orders and business activity.

Ines Lam, an economist at HSBC, commented, “India’s services companies showed strong optimism in December, with business activity growth reaching a four-month high. Indicators such as new business and future activity suggest continued strong performance in the near term. The easing of input price inflation also bolstered business sentiment. The strength of the services PMI contrasts with signs of a slowdown in the manufacturing sector.”

Cost Pressures Ease in December

December 2024 saw a moderation in cost pressures, despite ongoing increases in food, labor, and material costs. While selling price inflation remained above the long-term trend, it eased from November’s 15-month high.

The report noted, “Although services companies still faced rising business expenses in December, the inflation rate softened compared to November’s peak.” Consumer services firms experienced the highest cost pressures, with transport, information, and communication services seeing the most significant price increases.

The rate of input cost inflation also eased across the private sector, leading to a slower rise in the prices of goods and services. However, firms faced an increased volume of backlogs, reaching a seven-month high, indicating continued pressure on capacity. International orders for services grew in December, though at a slower pace than in previous months.

Manufacturing PMI Declines

India’s manufacturing PMI for December 2024 dropped to a 12-month low of 56.4, due to slower expansion rates in production and new business orders. The lowest manufacturing PMI in 2024 was also recorded in November and January, at 56.5.

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