Manufacturers and service providers both signalled increases in output, with rates of growth quickening in both sectors. The seasonally adjusted HSBC Services Business Activity Index posted 55.6 in December, up from 52.1 in the previous month. The latest reading signalled a sharp expansion in activity, the fastest in three months.

Monitored companies mentioned that output growth was supported by higher new total business and maintained quality of services.

As has been the case since May 2009 the volume of incoming new work in the Indian private sector rose during December. With manufacturing and services companies both registering sharp growth, the overall rate of expansion was steep and the fastest in ten months. Among other factors, monitored companies mentioned that new business increased in tandem with stronger demand.

Indian manufacturers and service providers both signalled rising staffing levels during December, amid
reports of output growth. However, rates of expansion were only slight. Employment in the private sector rose at the slowest rate in the current 10-month sequence of job creation. Continuing the trend that started in April 2009, input prices in the Indian private sector rose during December.

Although sharp, the pace of inflation eased to a 30-month low. Monitored companies indicated that raw material, fuel and labour costs all rose. There were also mentions of higher tax rates and unfavourable exchange rates. Part of the burden of cost inflation was passed on to clients as average selling prices rose again, and at a solid pace.

Meanwhile, the volume of work-in-hand (but not yet completed) at private sector companies in India rose in December. The pace of accumulation was solid and the fastest in 30 months. Optimism was signalled by service providers in India during December.

Approximately 46% of monitored companies expect overall activity to increase in the upcoming year, and they mentioned anticipated rises in demand, the launch of new projects and increased advertising.

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