Activity in India’s service sector accelerated to a 10-year high in October despite growing output costs owing to input cost inflation, according to the monthly IHS Markit India Services Purchasing Manager’s Index (PMI) revealed on Wednesday, November 3. The PMI rose to 58.4 in October from 55.2 in September and 56.7 in August, settling in the expansion territory for the third consecutive month.
Growth in the activities of the service sector has been attributed largely to the receding COVID-19 pandemic, which has led to surging demands and a subsequent boost in sales and output. The growth was founded upon months of gradual increase in the pace of activity in the Indian service sector.
According to respondents of the PMI survey, new work intake increased at a sharp and quickened rate, the strongest since July 2011, despite firms having to charge more for services as the cost burden emerging due to increase in input cost was passed down to the consumers. Pollyanna De Lima, Economics Associate Director at IHS Markit, said,” A substantial rise in prices charged for the provision of services in India had no detrimental impact on demand.”
However, concern over the impact of inflationary pressures on economic recovery has subdued business sentiment. PMI data in October suggested a sixteenth successive monthly rise in input costs at Indian service firms, as the rate of inflation touched a six-month high.
The accommodative market environment and increase in customer footfall due to ease in COVID-19 related travel restrictions have also contributed to the gradual recovery of the sector. However, the rise in international demand was short of meeting the same pace as the growth in domestic demand.
The PMI survey data alluded to weak international demand for the service sector in India. The new export business contracted further in October however the rate of contraction remained the lowest since March.
The service sector in India also saw an increase in the number of jobs after a nine-month period in October. Although modest, the velocity of job creation strengthened from September to the strongest since February last year. “Hence, the recovery of the 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,” Lima said.