India Services PMI Rises to 54.1 as Hiring Accelerates

India’s services sector expanded at a slightly faster pace in August, although weak growth in new business kept activity close to its lowest levels in more than four years, according to a private-sector survey.

The HSBC India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, climbed to 54.1 in August from 53.3 in July. The final reading was below the preliminary estimate of 54.5 and slightly under its long-term average.

A PMI reading above 50 indicates expansion, while a figure below that threshold signals contraction.

Despite the improvement in overall activity, demand remained relatively subdued. New business, a key gauge of demand conditions, increased at the second-slowest rate in more than four years. International demand provided only modest support, with new export orders growing at roughly the same pace as in July.

Employment offered a brighter signal for India’s services economy. Companies increased staffing at the fastest pace in 15 months, suggesting businesses remain willing to expand their workforce despite softer demand conditions.

Business sentiment, however, stayed below its historical average for a second consecutive month. Firms remained cautiously optimistic that improving market conditions and stronger demand could support future activity.

India’s broader economic outlook also faces pressure from elevated oil prices and a weaker rupee. A Reuters poll forecast Asia’s third-largest economy will grow 6.7% this fiscal year, slowing from the stronger-than-expected 7.8% expansion recorded in the previous quarter.

Inflationary pressures increased modestly during August. Services companies raised prices charged to customers at the fastest pace since March as they passed higher operating costs on to clients.

Meanwhile, India’s Composite PMI, which tracks both manufacturing and services activity, remained unchanged at 54.3. Faster services growth helped offset weaker manufacturing activity, which slowed to its lowest level in five years.

The latest PMI figures suggest India’s services sector remains firmly in expansion territory, but sluggish new business, subdued confidence and rising costs continue to cloud the near-term outlook.