Growth in India’s dominant services sector remained strong in November despite the steepest rise in prices for over a decade, while consistent demand led to a significant rise in business sentiment and record hiring, a business survey showed.
The HSBC final India Services Purchasing Managers’ Index , compiled by S&P Global, stayed almost unchanged at 58.4 in November from 58.5 in October, but was lower than a preliminary estimate of 59.2.
A sub-index measuring new business – a gauge of demand – fell from October but showed no concerning signs of weakness. It was supported by international demand that rose at its fastest pace since August.
Nevertheless, a substantial improvement was seen in the business outlook for the year-ahead based on predictions of strong demand. The future activity sub-index was the highest in six months.
Solid demand for services resulted in the fastest pace of hiring since the survey’s inception in December 2005.
“The hiring surge reflected the sector’s improving business confidence, growing new orders, and vigorous international demand,” noted Pranjul Bhandari, chief India economist at HSBC.
More employment could boost slowing consumption in the economy, one of the main drags on GDP data last quarter.
Growth in the world’s fifth-largest economy eased to 5.4% in the July-September quarter from 6.7% in April-June.
But the Reserve Bank of India was not expected to loosen policy until early next year as inflation in October rose beyond the central bank’s 2-6% target range, a Reuters poll showed last week.
A pronounced rise in inflation was also noticed in the PMI. Cost prices rose at their quickest pace in 15 months, triggered by labour and materials expenses.
Firms passed on the extra cost burden to their clients, leading to the fastest rise in prices charged for nearly 12 years.
A manufacturing PMI released on Monday cooled to 56.5 last month, which along with the minor slip in services activity dragged the overall Composite PMI slightly in November. The index fell to 58.6 last month from 59.1.
