India's Services PMI Stays Strong Despite Easing In June

India's services activity expanded at the slowest pace in three months in June, according to a private survey, but continues to reflect strong demand even as prices charged to consumers rose.

The seasonally adjusted S&P Global India Services PMI Business Activity Index stood at 58.5 in June compared with 61.2 in May, according to IHS Markit. A print above 50 means expansion, while a number below 50 indicates contraction.

A quicker expansion in intake of new business, positive demand trends, advertising, and favourable market conditions kept the momentum going, according to the survey. New export business rose for the fifth straight month, even if at a slower pace than May.

A strong services sector, contributing more than half of India's GDP, underscores a resilient economy. The India Manufacturing Purchasing Managers’ Index stood at 57.8 in June compared with 58.7 in May. Together with services, that suggests continued momentum with the composite PMI reading at 59.4 in June, even though it eased from 61.6 in May.

This bullish momentum supported a further sharp upturn in "business activity and encouraged another uplift in employment figures", boding well to near-term growth prospects, said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence. "Job creation in fact also reflected positive forecasts among companies about the year ahead outlook for output."

Inflation in prices charged to consumers, however, rose to the strongest level in just under six years on higher services and staff costs, according to the survey. But the overall rate of inflation has softened since May, broadly converging towards its long-run average, it said.

Service sector employment expanded as companies sought to stay on top of their workloads and fulfill growing demand, the note said. The rate of job creation was the joint-fastest in six months. Predictions of further demand strength, favourable market conditions, and customer relations boosted business confidence to its most upbeat in 2023, it said.