India Services Expands at Fastest in 11 years on Demand Revival

(Bloomberg) -- India's services activity expanded at the fastest pace in more than a decade, even as rising prices pose risks to the demand revival.

S&P Global India Purchasing Managers Index for services rose to 59.2 in June from 58.9 in May. A number above 50 shows expansion, while a print below that shows contraction in activity. 

The upturn stemmed from ongoing improvements in demand that followed the retreat of pandemic restrictions, capacity expansion and a favorable economic environment, the survey showed. Activity growth in India's service sector is strongest in over 11 years, even as inflationary woes weigh on the economy.

Firms were able to secure new orders despite charging more for their services. June data showed the fastest rise in selling prices since July 2017 as several companies sought to transfer part of their additional cost burdens to clients. Stronger increases in charges were seen across the four broad areas of the service economy, with the sharpest upturn recorded in transport, information & communication, the survey showed. 

“Unrelenting inflation somewhat concerned service providers, who were cautious in their forecasts,” said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence. “On average, business activity is expected to increase over the course of the coming 12 months, but the overall level of sentiment remained historically low,” she added.

The world's sixth-largest economy is also facing challenges from widening trade deficit and runaway rupee depreciation. 

S&P's survey of India factory managers last week showed, that manufacturing expansion slowing to 53.9 in June, from 54.6 in the previous month. The drop in manufacturing output brought the composite index to 58.2, against 58.3 in May.

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