India's services sector growth hits 6-month high in December on strong demand

New Delhi: With a quicker upturn in new business boosting output growth, India's services industry witnessed activity increase at the fastest pace in six months during the final month of 2022, ie; December. Amid the robust demand, fuelling business optimism despite high costs, more jobs were created and companies remained upbeat towards the year ahead, a private-sector survey showed on Wednesday.

The S&P Global India services purchasing managers' index (PMI) rose to 58.5 in December from 56.4 in the previous month, confounding expectation in a Reuters poll for a fall to 55.5. The index was above the 50-mark separating growth from contraction for the 17th straight month - the longest stretch of growth since June 2013.

As per the survey, new businesses received by Indian services firms increased for the seventeenth month in a row in December. Moreover, the rate of expansion was sharp and the fastest since August. Where growth was reported, panellists mentioned demand strength and successful marketing initiatives.

"The finance and insurance segment recorded the quickest increase in output, whereas real estate and business services propped the rankings. There was a sharp rise in firms' expenses — amid greater energy, food, staff and transportation costs — which led to a further increase in prices charged for the provision of services,” the survey said.

Commenting on the survey, Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said: "December saw a welcome in Indian services activity, underscoring the resilience of demand as 2022 came to an end. As we head into 2023, companies signalled strong optimism towards the outlook for output. Around 31 per cent of panellists forecast growth, while only 2 per cent anticipate a contraction."

"Positive sentiment and ongoing growth of new business continued to support job creation, but there were areas where capacities were reportedly adequate to cope with requirements. Inflation trends were mixed, as input prices rose at a faster pace and the upturn in charges moderated," Lima said.

"On the expense front, services firms reported pressure fromen food, staff and transportation costs. Although easing from November, the rate of output charge inflation remained elevated as several companies felt the need to transfer escalating costs through to clients," Lima added