Services sector growth hits six month high in Dec on strong demand

NEW DELHI: The Indian services sector growth touched a six-month high in December, supported by a robust intake of new work and favourable market conditions, a monthly survey said on Wednesday.

The seasonally adjusted S&P Global India Services PMI Business Activity Index rose from 56.4 in November to 58.5 in December, highlighting the strongest rate of expansion since mid-2022.

For the 17th straight month, the headline figure was above the neutral 50 threshold. In Purchasing Managers’ Index (PMI) parlance, a print above 50 means expansion while a score below 50 denotes contraction.

“December saw a welcome expansion in Indian services activity, underscoring the resilience of demand as 2022 came to an end,” said Pollyanna De Lima, economics associate director, S &P Global Market Intelligence.

Lima further noted that “as we head into 2023, companies signalled strong optimism towards the outlook for output. Around 31 per cent of panellists forecast growth, while only 2 per cent anticipate a contraction.”

Meanwhile, in December, more jobs were created and companies remained strongly upbeat towards the year ahead outlook for business activity.

“Positive sentiment and ongoing growth of new business continued to support job creation, but there were areas where capacities were reportedly adequate to cope with current requirements,” Lima said.

On the inflation front, input costs at services companies rose further, with companies mentioning wage pressures and higher prices for energy, food and transportation. “Inflation trends were mixed, as input prices rose at a faster pace and the upturn in charges moderated. On the expense front, services firms reported pressure from energy, food, staff and transportation costs,” Lima said.

Meanwhile, the S&P Global India Composite PMI Output Index - which measures combined services and manufacturing output - rose from 56.7 in November to 59.4 in December. “Aggregate sales rose sharply and at the fastest pace since August, boosted by quicker expansions at goods producers and services companies,” the survey said.

Citigroup cuts India’s CAD forecast to below 3% of GDP

MUMBAI: Citigroup lowered its projection for India’s current account deficit (CAD) to 2.9% of gross domestic product (GDP) for the current fiscal year, citing the growth in the country’s service exports and a lower oil price forecast. The brokerage had, in August last year, said it expected India’s CAD to be as high as 3.9% of GDP for the fiscal year ending March 2023. “The key surprise came from the phenomenal growth in services exports in the first half of the current fiscal year, which goes beyond just software services,” Samiran Chakraborty, chief economist for India at Citi, said in a note. Net exports of services rose 35% to $34.5 billion in the second quarter of the current fiscal. Citi also revised its CAD forecast for fiscal 2023-24 to 2.2% of GDP, from 2.4% earlier.