The services sector growth in India rose to a three-month high in December supported by favourable economic conditions and positive demand trends, a monthly survey said on Friday.
The seasonally adjusted HSBC India Services PMI Business Activity Index rose from 56.9 in November to 59 in December, highlighting a sharp increase in output that was the most pronounced since September.
In Purchasing Managers' Index (PMI) parlance, a print above 50 means expansion while a score below 50 denotes contraction. The survey is compiled from responses to questionnaires sent to a panel of around 400 service sector companies.
"India's services sector ended the year on a high note, with an uptick in business activity, led by a three-month high new orders index," said Pranjul Bhandari, Chief India Economist at HSBC.
The rise in total new business was supported by continued growth of international sales. Service providers noted higher demand from clients based in Australia, Canada, Europe, the Middle East and South America during December.
"Demand buoyancy spurred sales, subsequently fuelling business activity. Job creation extended into a 19th successive month, while business optimism strengthened," the survey said.
Going ahead, services firms in India expect the strong demand momentum to carry forward to 2024 on advertising and better customer relationships.
On the prices front, cost pressures receded further, reaching their lowest in nearly three-and-a-half years. Still, there was a quicker and solid upturn in selling charges.
"Input costs rose at a slower pace than in November, continuing the softening trend which began in mid-2023. But output prices rose at a faster pace, indicating improved corporate margins in December," Bhandari added.
Meanwhile, the HSBC India Composite PMI Output Index increased from 57.4 to 58.5, signalling a sharp rate of expansion that was the strongest since September.
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.
The acceleration in December Composite PMI was underpinned by faster growth in the service economy, as factory production rose at the slowest pace in 14 months.
According to the survey, goods producers noted a weaker upturn in new orders, while service providers registered an acceleration. At the composite level, sales expanded at the fastest rate since September.