India’s services sector experienced significant growth in October 2024, as reflected by the Purchasing Managers’ Index (PMI), which rose from 57.7 in September to 58.5. According to a private survey conducted by HSBC and compiled by S&P Global, this growth marks a rebound from a 10-month low in September. Notably, the PMI has now stayed above the neutral 50-mark for 39 consecutive months, signaling sustained expansion across the sector.

The increase in demand from both domestic and international clients contributed to this resurgence. Businesses in the services sector saw new orders from customers not only within India but also from countries across Africa, Asia, the Americas, the Middle East, and the United Kingdom. This broad demand base highlights the robustness of India’s service offerings on a global scale, as international clients continue to seek Indian services.

Rising Demand and Expanding Workforce

The growth in demand prompted many companies to increase hiring, with the rate of job creation reaching its highest level in over two years. Approximately 13% of surveyed companies reported new job creation in October, a marked rise from 9% in September. The positive hiring trend spans both full-time and part-time roles, as firms look to scale up their operations to meet business growth demands.

As India’s service sector expands, companies are responding by adding to their workforce, creating more employment opportunities in the economy. This reflects the underlying strength in sectors like consumer services, finance, technology, and more, where companies are actively seeking to enhance productivity and customer satisfaction.

Inflationary Pressures and Input Costs

In October, input costs rose at the fastest rate seen in three months, largely due to increased wages and rising food prices. Companies are responding to inflationary pressures by passing on these costs to clients. However, despite these cost increases, overall inflation remains below the long-term average, indicating that businesses are managing costs effectively while still benefiting from strong demand.

The consumer services segment experienced the highest cost pressures, as companies in this area often rely on human resources and commodity inputs, both of which have seen price increases. This, however, has not deterred the sector from continuing its upward trajectory, supported by optimistic business sentiment.

Key Insights from Experts

Ms. Pranjul Bhandari, Chief India Economist at HSBC, emphasized that output and consumer demand expansion have been critical factors driving growth. She noted that while input price inflation is indeed rising due to higher wage and food costs, business sentiment remains highly positive. With job creation at a 26-month high, companies are confident in the potential for sustained growth in the services sector.

Ms. Bhandari highlighted that businesses are generally optimistic about future sector activities, and the outlook for 2025 remains positive. The strength in consumer demand and export growth provides a solid foundation for continued expansion, although inflationary pressures will remain a key factor to watch in the coming months.

Broader Implications for India’s Economy

The growth in India’s services sector, supported by strong demand and job creation, signals a resilient economy that continues to expand despite global economic uncertainties. The sustained growth in the PMI index for 39 months underscores the sector’s importance as a driver of economic growth and employment creation. The positive export sales momentum further boosts India’s global standing as a reliable service provider across various sectors.

As the services sector continues to grow, its impact on India’s overall economic stability and job market becomes even more significant. The sector’s resilience amidst global challenges reinforces India’s position as a key player in the global services industry.

Conclusion

India’s services sector experienced a robust recovery in October, with strong domestic and export demand, record job creation, and manageable inflationary pressures. As businesses continue to expand their workforce and meet increased demand, the services sector’s outlook remains positive. The combination of high consumer demand, export growth, and positive business sentiment bodes well for the continued success of India’s service economy, making it a pivotal contributor to the nation’s economic growth.

The Upcoming IPOs in this week and coming weeks are Neelam Lines and Garments, Rosmerta Digital, NTPC Green, Avanse Financial and Black Buck.

The Current active IPO is Sagility India Limited, Swiggy, ACME Solar Holdings and Niva Bupa Health.

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