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.

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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