India's Services Sector Continues To Strengthen; Price Pressure Remains The Biggest Constraint

India's dominant Services sector activity data compiled by IHS Markit revealed today shows that the output during the period has expanded at the fastest pace in over a decade. The growth has been backed by robust recovery seen in domestic demand, however increased prices continues to be a major headwind.

For the November month, Services PMI or Purchasing Managers Index softened by a tad in comparison to October figure of 58.4 to 58.1. Nevertheless the last month's growth has been the second best in more than a decade. The levels above 50 separate growth from contraction.

"PMI data for November indicated that the Indian service sector continued to strengthen, with a substantial upturn in new orders underpinning output growth. Although companies forecast higher business activity volumes over the course of the coming year, the expansion is expected to be restricted by price pressures. Input costs rose at the second-strongest pace in close to ten years, while the rate of charge inflation softened from October's recent high", said the release.

Owing to government fiscal support as well as pace of vaccination, the country witnessed the fastest growth among top economies in the last quarter ended September at 8.4 percent annually.

Commenting on the latest survey results, Pollyanna De Lima, Economics Associate Director at IHS Markit, said: "The recovery of the Indian service sector was extended to November, with a robust improvement in sales enabling the second-fastest rise in business activity in nearly ten-and-a-half years. Companies were somewhat convinced that output levels would continue to increase in the year ahead, but worries regarding inflationary pressures weighed on confidence again. "Not only did services firms see their expenses increase further in November, but also to one of the greatest extents in a decade. Some of the additional cost burden was shared with customers in November via upward revisions to selling prices. The rate of charge inflation eased from October, however, and was only moderate.

"Looking at the manufacturing and service sectors combined, the results are even more encouraging and bode well for economic performance in the third quarter of fiscal year 2021/22 so far. With production growth quickening considerably in November, private sector output expanded at the fastest pace since January 2012."

Furthermore, on the employment front, despite better business outlook, hiring pace has been the weakest in 3 months.

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