The services sector, with the largest share in Gross Value Added (GVA), started FY24 with a bang, as the purchasing managers’ index (PMI) jumped to a near 13-year high in April to 62 as against 57.8 reported in March. However, the job situation is yet to improve.

A pick-up in new business and favourable market conditions lifted the index, according to the purchasing executives from 400 companies.

Companies covered in the survey belong to sub-sectors such as consumer (excluding retail), transport, information, communication, finance, insurance, real estate and business services. The strongest output increase was seen in finance and insurance.

Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said the services sector posted a remarkable performance in April, with demand strength backing the strongest increases in new business and output in just under 13 years. “Having retreated in each month since the start of the current calendar year, input price inflation quickened in April. PMI survey participants indicated higher salaries and wages awarded to staff, as well as pressures from food, fuel and transportation costs. Accommodative demand conditions facilitated the pass-through of additional expenses to clients, with prices charged for the provision of services increasing at the strongest rate in 2023 so far,” she said.

However, job creation remained negligible. According to S&P Global, despite the substantial uptick in new orders, staff levels in the services sector increased only marginally at the start of the first quarters this fiscal. While some companies increased their headcount due to rising output needs, the vast majority left them unchanged with an adequate number of workers for their current requirements.

Weak labour market

“One area of weakness highlighted in the latest results was the labour market. Despite the substantial pick-up in sales growth and improved business sentiment, the increase in employment in April was negligible and failed to gain meaningful traction,” De Lima said.

Also read:India’s manufacturing PMI rises to 4-month high in April on growing order book

Services has an over 50 per cent share in GVA. Its growth is critical for GDP (Gross Domestic Products) expansion. Services and manufacturing have a combined share of over 70 per cent. On Monday, S&P Global reported manufacturing PMI for April at 57.2, a four-month high. These two data are released ahead of the release of official data on services and manufacturing for the April-June quarter in August.

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