India’s Services PMI Hits 10-Month High in June

INDIA’S SERVICES PMI RISES TO 10-MONTH HIGH IN JUNE

Why in the News?

• PMI Surge: India’s Services PMI, also known as the business activity index, rose to 60.4 in June, up from 58.8 in May, marking a ten-month high according to the latest S&P Global PMI survey conducted in collaboration with HSBC India.
• Domestic boost: Growth driven by a sharp rise in aggregate new business and new business orders, with export orders growing at a softer pace.
• Four-year streak: The index has stayed above 50 for the thirty-seventh consecutive month, indicating continued expansion in the service sector.

Sectoral Performance and Economic Indicators

• Broad-based growth: Most segments of the service sector expanded, with Finance and Insurance seeing the fastest growth.
• Weakest link: Real Estate and Business Services recorded the slowest growth in June.
• Job market: Employment growth and job creation rose, though at a slower pace than May, still above the long-run average.
• Cost dynamics: While cost burdens increased, input cost inflation fell to the lowest in 10 months; firms passed on costs to consumers as price pressures eased.
• Profit margins: Margins improved as output charge inflation outpaced input cost rise, especially in the consumer services category.

Significance and Future Outlook

• Improved sentiment: Despite a slight dip in optimism, service providers remain confident about future demand.
• Economic momentum: Rise in Manufacturing PMI alongside Services PMI suggests broad economic strength in private sector activity.
• Policy implications: Sustained growth may influence RBI’s stance on inflation and monetary easing.