Services sectors saw one of the sharpest increases in employment since records began in December 2005
India’s services sector experienced a significant recovery in February, as the HSBC India Services Purchasing Managers’ Index (PMI) increased to 59.0, up from January’s 56.5—its lowest level in over two years. According to the latest data from S&P Global, the growth was fueled by a sharp rise in new business orders, both domestic and international, which boosted output and led to a notable increase in employment.
Strong demand drives services sector rebound
The expansion of the services sector was driven by rising demand, especially from international markets, which saw their fastest growth in six months, as indicated by the new export business index. This surge prompted firms to ramp up operations, resulting in one of the most significant employment increases since records began in December 2005. Companies reported hiring both full- and part-time workers to manage growing workloads and alleviate capacity constraints.
Pranjul Bhandari, Chief India Economist at HSBC, commented on the growth of the services sector, stating, “Job creation and charge inflation remained strong during February. Looking ahead, business sentiment remains broadly positive, but did slightly slip last month to its lowest level since August 2024.”
Cost pressures remain a concern
Although the services sector performed strongly overall, cost pressures remained a challenge, according to the survey. Firms cited higher expenses driven by new hires, salary increases, and overtime payments, though the overall input cost inflation rate moderated to a four-month low. The consumer services segment experienced the highest cost pressures, with rising expenses for food, materials, and packaging contributing to inflationary challenges.
Manufacturing slows in Feb
Indian manufacturers experienced a decline in new orders and a slowdown in production growth, with February’s PMI dropping to a 14-month low of 56.3, compared to 57.7 in January, according to data released on Monday. However, robust growth in the services sector lifted the overall Composite PMI to 58.8 in February, up from 57.7 in the previous month. The Purchasing Managers’ Index (PMI) provides insights into the performance of the manufacturing and services sectors, offering investors a valuable gauge of business conditions and the broader economic environment. A PMI reading above 50 indicates expansion, below 50 signals contraction, and 50 reflects no change.
