A business survey showed on Wednesday that India’s dominant services sector growth was slowest in over two years in January amid cooling demand. However, it remained historically strong and led to a substantial rate of hiring.
The HSBC final India Services Purchasing Managers’ Index, compiled by S&P Global, fell to 56.5 in January from 59.3 in December, a tad lower than a preliminary estimate of 56.8 but comfortably ahead of the 50-mark separating contraction from growth.
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Notably, the PMI in January has been the lowest since November 2022.
Pranjul Bhandari, chief India economist at HSBC said, “The business activity and new business PMI indices eased to their lowest levels since November 2022 and November 2023 respectively.”
“That said, new export business partly countered the downtrend and continued to rebound from a dip in late 2024, in line with official data.”
Despite the slowdown, service providers remained optimistic about business activity over the next 12 months, citing advertising, competitive pricing, and new client inquiries as key drivers. However, overall sentiment dipped to a three-month low, aligning with the broader trend.
Finance Minister Nirmala Sitharaman in the Union Budget gave some tax relief to the middle class but shied away from announcing big reforms which are much needed to prop up growth.
India’s retail inflation rate for December eased at 5.22 per cent increasing the chances of easier monetary policy. The Reserve Bank of India is widely expected to cut its key repo rate at its MPC meet, an announcement for which is set to be made on Friday.
