India’s service sector activity expanded at its strongest pace in ten-and-a-half years in October due to a growth in business and an increase in consumer demand, according to a survey released by analytics firm IHS Markit India.
The monthly purchasing managers’ index increased from 55.2 in September to 58.4 in October. A reading above 50 shows an expansion, while a lower reading indicates a contraction in manufacturing or service sector activities.
“The recovery of the [service] sector entered its third straight month, with firms scaling up activity at the fastest pace in ten-and-a-half years and creating more jobs,” said Pollyanna De Lima, economics associate director at IHS Markit.
The rise in inflation – which is at a six-month high – posed a challenge for the service sector. Data from October revealed an increase in input costs. The rise in input prices was driven by the increase in fuel prices and raw material cost. The companies surveyed by IHS Markit cited expenditure in retail, staff payments and transport costs.
“Service providers were concerned that persistent inflationary pressures could deter growth in the coming year,” Lima said. “Business confidence remained subdued in the context of historical data.”
Meanwhile, the service sector companies continued to hire workers in October. The pace of job creation has increased since September and has been the highest since February 2020.
Indian firms were able to secure new work despite charging more for their services. However, the data pointed out that the international demand for Indian services was weak. New export business decreased in October – a trend that has been recorded since the coronavirus outbreak in January last year.
Services providers said that they were confident of business activity picking up over 12 months, according to the report.
“Some firms expect sales and output to increase as the pandemic recedes and marketing efforts bear fruit, but others were concerned about the impact of inflationary pressures on the recovery,” the report said.