India’s April services exports growth near record high

BENGALURU : Growth in India’s dominant services industry softened in April but remained sturdy on robust domestic and foreign demand, lifting business confidence to a three-month high, a survey showed on Monday.

The HSBC final India Services Purchasing Managers’ Index, compiled by S&P Global, fell to 60.8 in April from 61.2 in March, confounding a preliminary estimate for a rise to 61.7.

Despite the decline in the headline reading, the figure still marked one of the fastest growth rates in just under 14 years.

Activity in the services sector has been above the 50-mark separating growth from contraction since August 2021.

Favourable market conditions and buoyant demand pushed the new business sub-index to a three-month high, the third-highest in around 14 years.

“India’s service activity rose at a slightly softer pace in April, backed by a further rise in new orders, with notable strength in domestic demand,” noted Pranjul Bhandari, Chief India Economist at HSBC.

“Although new export orders remained robust, they showed a slight moderation from March.”

Strong global demand for Indian services meant the index only dipped slightly from March when it chalked up its highest reading since data collection started in September 2014.

However, growing business optimism failed to create jobs at a significant pace. Hiring was muted although the current sequence of job growth extended to almost two years.

Operating costs increased at a high pace stemming from elevated raw material and labour costs. However, the rate at which firms passed on the burden to clients softened from a near seven-year high in March.

Quarterly inflation in India was forecast to average 5.0% or below this fiscal year, according to an April Reuters poll, giving room for the Reserve Bank of India (RBI) to cut rates.

Economists predicted the RBI will lower its key repo rate by 50 basis points before year-end.

A manufacturing index released on Thursday dipped modestly to 58.8 in April, which combined with the small retreat in services activity, brought down the overall Composite PMI to 61.5 from March’s eight-month high of 61.8.

“In terms of overall activity, aggregate output across both the manufacturing and service sectors rose significantly in April, albeit at a slightly slower pace, indicating sustained health in these sectors,” added Bhandari.