In January 2025, India's services sector grew at its slowest pace in over two years, as reported by the HSBC India Services PMI. The slowdown was due to weakened new business growth and softened demand momentum. Despite this, job creation increased significantly, and business sentiment remained positive.
The HSBC Services PMI data indicates that India's services sector is still resilient, with strong job creation, export growth, and steady business confidence. However, inflationary pressures and rising competition could pose challenges in the future.
Pranjul Bhandari, Chief India Economist at HSBC, noted that the services sector lost growth momentum, although the PMI stayed above the 50-breakeven level. Business activity and new business indices reached their lowest since November 2022 and 2023, respectively. However, new export business rebounded, aligning with official data showing strong services exports in December.
The HSBC India Services PMI Business Activity Index dropped to 56.5 in January from 59.3 in December, the lowest since November 2022. This indicates a slowdown, but the index remains above 50, signaling continued growth. The slowdown was due to softer sales and output increases, with new business inflows at their weakest in 14 months.
Some companies attributed growth to strong demand, new clients, and technology investments, while others faced competitive pressures. International sales rose at the fastest pace in five months, with demand from Asia, Europe, the Middle East, and the Americas.
Inflationary pressures persisted, with rising staff costs and food prices increasing expenses. Companies passed on higher costs to consumers, leading to a sharper rise in output charges. Despite this, job creation accelerated, with hiring rates among the fastest since December 2005.
Service providers remain optimistic about the next 12 months, citing advertising, competitive pricing, and new client acquisitions as key drivers. However, confidence eased to a three-month low, though it aligns with historical trends.
India's private sector output also slowed, with the HSBC Composite Output Index falling to a 14-month low of 57.7 in January from 59.2 in December. While manufacturing output increased, it was offset by weaker services sector expansion. Overall input price inflation eased to its lowest since October 2024, but service providers raised prices faster than goods producers, keeping inflation steady.
The services sector includes businesses that provide services rather than goods. This can include things like banking, education, healthcare, and tourism.
Job creation means that more jobs are being made available for people to work. This is a good sign because it means more people can find work and earn money.
HSBC is a big bank that operates in many countries, including India. They provide financial services like saving money, loans, and investments.
PMI stands for Purchasing Managers' Index. It's a number that shows how well the economy is doing, especially in the manufacturing and services sectors. A number above 50 means the sector is growing.
Inflationary pressures mean that prices of goods and services are going up. This can make things more expensive for people to buy.
The breakeven level in PMI is 50. If the PMI is above 50, it means the sector is growing. If it's below 50, it means the sector is shrinking.
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