India's Service Sector Powers Through Inflationary Pressure: Report

Despite high price inflation, India’s service sector growth remained strong in June, albeit at a three-month low, according to a private business survey. The sector, which accounts for approximately 60% of overall output, indicates that India’s economy will continue to outperform many of its major peers in the coming quarters, Reuters reported.

PMI Figures

The S&P Global India services Purchasing Managers’ Index (PMI) fell to 58.5 in June from 61.2 in May, lower than a Reuters poll prediction for 60.2. However, it remained above the 50-mark separating growth from contraction, marking the longest stretch of growth since August 2011.

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Business Activity and Employment

“Demand for Indian services continued to surge higher in June, with all four monitored sub-sectors registering quicker increases in new business inflows,” noted Pollyanna De Lima, economics associate director at S&P Global Market Intelligence. This growth momentum supported a sharp upturn in business activity and encouraged an uplift in employment figures.

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Price Inflation

Despite slowing input cost inflation, services firms raised prices at their sharpest rate since July 2017. “Service providers experienced a retreat in cost pressures, although business expenses rose again amid higher food and wage costs … Combined with manufacturing, output prices across the private sector increased at the sharpest pace in over a decade,” added De Lima.

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