India’s services sector lost growth momentum in January: HSBC Survey

New Delhi: After ending 2024 on a strong note, activities in dominant services sectors in India slumped to more than two year low as the demand softened but it remained strong and led to a substantial rate of hiring. The loss of growth momentum in the month of January could be attributed to slow pace of growth in new business orders, a private survey showed on Wednesday.

As per the survey, though the the seasonally adjusted HSBC India Services Purchasing Managers' Index or PMI was seen at 56.5 in January, down from 59.3 in December, the headline index still indicated a sharp rate of expansion in the sector. Nevertheless, the index has been above the neutral 50-mark that separates contraction from expansion for 42 months straight.

Commenting to the survey, Pranjul Bhandari, chief India economist at HSBC said that India’s services sector lost growth momentum in January and the business activity as well as the new business PMI indices eased to their lowest levels since November 2022 and November 2023 respectively. "That said, new export business partly countered the downtrend and continued to rebound from a dip in late-2024, in line with official data which showed India’s services exports shinning in December and capturing a larger share of global trade," Bhandari added.

The survey further noted that overall new business continued to increase strongly but the rate of expansion softened to the weakest in 14 months. "The rise was attributed to strong demand and decisions to offer better prices than rivals. Growth was reportedly curbed by intense competition,” said the survey. As for prices, cost burdens increased to broadly the same extent as in December, with firms largely reporting greater payroll expenses," the survey said.

On job fronts and hiring, the survey, however, noted that full and part-time positions had been filled. "The rate of job creation accelerated from December and was among the fastest seen since data collection started in December 2005. Besides, qualitative data showed that advertising, efforts to price competitively and new client enquiries were some of the reasons listed for upbeat forecasts," it said.

In contrast to the trend for total new orders, the survey also noted that there was a quicker increase in international sales. "The survey participants noted gains from clients in Asia, Europe, the Middle East and the Americas. The overall rate of expansion hit a five-month high. Ongoing improvements in new business intakes and rising capacity pressures prompted service providers to recruit additional staff at the start of the last fiscal quarter," it noted.�