India’s services sector expanded further in September — registering the fastest pace of growth in seven months — driven by firm demand and “resilience” of the sector, an HSBC survey said.
The HSBC’s Services Purchasing Managers Index (PMI) for September inched upwards to 55.8 from 55 in August. Since November 2011, the index has kept above the 50-mark which indicates expansion.
“Services sector activity grew at a faster clip in September led by firm demand, underscoring the resilience of the services sector,” HSBC Chief Economist for India and ASEAN Leif Eskesen said.
During the month, the services sector saw new orders expanding at a sharp rate — fastest in seven months. Moreover, services companies also remained optimistic on the short-term business outlook.
Earlier, an HSBC survey had shown that India’s manufacturing sector “held steady” in September supported by faster output growth and rising export orders.
Accordingly, the HSBC India Composite Output Index, which maps both services and manufacturing activity, stood at 55 during the month, up from August reading of 54.3, signalling further improvement in the private sector activity.
On inflation, HSBC said the pressures have “firmed” again on the back of rising costs and the Central bank has limited room for policy rate cuts given the “persistence” in the rate of price rise.
Both service providers and manufacturers witnessed rise in input costs in September. But manufacturers registered the fastest increase in input prices since June due to rising raw material and diesel prices.
Retail inflation in August stood at 10.03 per cent, according to official data.
“The RBI has limited room for policy rate cuts given the persistence of inflation, although further progress on fiscal consolidation and structural reforms may eventually pave the way for some easing,” Eskesen said.
The government has taken a number of reform initiatives such as opening the multi—brand retail and aviation sectors to FDI, hiking diesel prices and capping the number of subsidised LPG cylinders.
In another round of big-ticket reforms, the Union Cabinet today is widely expected to consider raising the FDI cap in the insurance sector to 49 per cent and opening up the pension sector to foreign investment.
On the employment front, HSBC said more jobs were recorded in the private sector during September, marking a seven-month sequence of expanding workforce.