New Delhi: In a private survey, it has been revealed that India's services sector concluded the year 2023 with robust expansion, experiencing its fastest pace in three months in December. The survey, which marks the 29th consecutive month of growth, shows the index comfortably above the 50-mark, indicating a clear separation between expansion and contraction.
The surge in business activity is attributed to favorable economic conditions and increased demand, although international demand grew at the slowest pace in six months.
Despite a positive outlook, the rate of job creation remained subdued, with a marginal acceleration from November. However, the survey indicates that services firms anticipate sustained momentum in the coming year, as reflected in an upturn in the future activity sub-index—a key indicator of business optimism.
While firms experienced relief from inflationary pressures, as operating costs rose at the slowest pace since August 2020, they passed on additional costs to clients at a faster rate. Notably, this marks the first time in over three years that the rate of output price inflation has outpaced input costs, indicating improved corporate margins.
Inflation in India is expected to stay within the Reserve Bank of India's (RBI) target range of 2-6% for the current fiscal year and the next, according to the latest Reuters survey. The RBI is anticipated to reduce interest rates in the third quarter of this year, aligning with a forecasted rate cut by the U.S. Federal Reserve around the same time.
Despite a dip in the manufacturing sector index to 54.9 in December, the overall HSBC India Composite PMI Output Index surged to a three-month high of 58.5, buoyed by the strength of the services sector. This positive performance suggests resilience and optimism in India's economic landscape as it heads into the new year.
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