The activity in Indian services sector, which accounts for around 60% of Indian GDP, although rose for fourth consecutive month, but expanded at its weakest rate in three months in August as firms' order books filled up at a slower pace. The HSBC Services Purchasing Managers' Index (PMI), compiled by Markit, fell to 50.6 in August from 52.2 in July. A reading above 50 denotes growth while anything below implies contraction.
The HSBC Survey indicated that new business in the service sector rose for a fourth successive month in August, however the pace of expansion slowed from July. The new business sub-index fell to 51.9 from 52.6, a three-month low. However, service firms were not the only ones reporting lower order volumes. Factory surveys on Monday too showed new orders slowed for companies across Asia and Europe as tensions between Russia and Ukraine escalated and a patchy recovery in China.
Further, sector data indicated that growth of activity was broad-based, as only Hotels & Restaurants companies reported a reduction. However, the fastest increase was witnessed in Post & Telecommunications firms. Meanwhile, backlogs of work held by Indian services companies continued to grow in August, extending the current sequence of accumulation to six months. However, the rate of increase was modest overall. On the inflation front, slower charge inflation was recorded throughout the private sector, as output prices increased at the weakest pace since May 2013. Also interestingly, firms’ optimism about future activity, considered a good gauge for growth, was at a near-year low and suggesting inflation might cool both input prices and those paid by customers rose at a slower pace.
Lastly, according to survey, services activity was once again turning down following a swift post-election uptick, suggesting that an improvement in reforms momentum was required to lift sentiment in the sector. India's services activity, after shrinking for 10 months, expanded for the first time in May at the time Prime Minister Narendra Modi's Bharatiya Janata Party scored a landslide election victory that drove a wave of optimism. However, NDA government is yet to launch sweeping reforms aimed at pushing the economy back to the double-digit growth rates of late 2009-early 2010.
MoneyWorks4Me is a SEBI-registered Investment Adviser (IA) dedicated to helping investors build long-term wealth through transparent, research-driven, conflict-free guidance. Founded in 2008, we started our journey as a Research Analyst (RA), providing deep fundamental analysis, intrinsic value insights, and long-term investing frameworks for Indian equities. In 2017, we transitioned to a full-fledged SEBI-registered Investment Adviser, strengthening our commitment to acting as a fiduciary—always putting the investor’s interest first.
To become India’s most trusted, research-powered fiduciary advisory platform—where every investor, regardless of experience, can make calm, confident, and well-reasoned investment decisions.
MoneyWorks4Me ensures this through: