Boosted by strong all-round demand, services activities recorded a sharp uptick in February as Purchasing Managers’ Index (PMI) rose to 59, S&P Global reported on Wednesday. The month also saw good increase in employment.
“Global demand, which grew at its fastest pace in six months according to the new export business index, played a major role in driving output growth for India’s services sector,” Pranjul Bhandari, Chief India Economist at HSBC said. PMI was 56.5 in January. The index is prepared based on the responses of purchasing executives of 400 companies. Index above 50 means expansion, while below 50 indicated contraction.
According to the survey, productivity gains, favourable underlying demand, greater intake of new business and gains in international orders supported this uptick in growth, with service providers reporting better demand from clients in Africa, Asia, Europe, the Americas and the Middle East, the survey said.
Employment expanded
In order to accommodate for rising new business and alleviate capacity pressures, Indian services firms continued to pursue recruitment drives. Employment expanded sharply, and at one of the fastest rates seen since data collection began in December 2005.
“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,” Bhandari said.
Advertising, better customer relations, efficiency gains and healthy demand conditions all underpinned upbeat projections for output in the year ahead. Around one-quarter of survey members forecast growth in the year ahead, while fewer than 2 per cent were pessimistic.
HSBC India Composite Output Index
Meanwhile, the HSBC India Composite Output Index rose from 57.7 to 58.8, indicating a substantial rate of expansion.
Composite PMI indices are weighted averages of comparable manufacturing and services PMI indices. Weights reflect the relative size of the manufacturing and service sectors, according to official GDP data. At the composite level, payroll numbers expanded at a marked pace that was little changed from January’s survey record, while cost pressures across the private sector were at their least intense since last October, the survey said.
On the domestic macroeconomic front, the Indian economy grew by 6.2 per cent in the December quarter, recovering sequentially from seven-quarter lows, but the expansion came in lower than last year. For the full 2024-25 fiscal (April 2024 to March 2025), the government now pegs GDP growth at 6.5 per cent. The growth in the current fiscal and less than 7 per cent expected in the next will keep India as the fastest-expanding major economy.