Services sector growth eases, Rising costs, strong demand push up Inflation in July

The services sector in India exhibited strong performance in July, with the HSBC index recording 60.3, a slight dip from June. Growth was powered by technology investments, the expansion of online services, and new business. Although costs increased, favorable conditions helped boost employment and maintain a positive outlook for the future.
According to information, HSBC India Services Business Activity Index was at 60.3 in July, down fractionally from 60.5 in June and above the neutral mark of 50.0 for the 36th straight month. Service sector activity rose at a slightly slower pace in July, with new business increasing further, primarily driven by domestic demand. Looking ahead, services firms remained optimistic about the outlook for year ahead," Pranjul Bhandari, Chief India Economist at HSBC, reportedly stated.
On the price front, higher wage and material costs continued to push up business expenses, with the overall rate of inflation quickening from June. Stronger cost pressures and positive demand trends contributed to the steepest rise in prices charged for the provision of services for seven years, stated experts.
Meanwhile, the HSBC India Composite Output Index posted 60.7 in July, down only fractionally from 60.9 in June and above the crucial 50.0 no-change mark for the thirty-sixth month running, according to information.Robust demand conditions, reflected by increased new orders from both domestic and international markets, led firms to increase hiring levels, officials reportedly stated, adding that on the price front, higher wages and material costs led to a further increase in input costs. Consequently, output prices rose at the fastest pace in over 11 years.
Retail inflation for industrial workers eases to 3.67% in June 
According to information, Retail inflation for industrial workers fell to 3.67% in June, down from 3.86% in May, largely due to a decline in food prices. In comparison to the same month last year, June's inflation rate showed a significant decrease, dropping to 3.67% in 2024 from 5.57% in 2023. The CPI-IW for June 2024 rose to 141.4 points, an increase from May's 139.9 points.

(Writer is a Finance Research Analyst, based in Gandhinagar, Gujarat)