Indian services sector surges to 15 year high,inflation pressures rise

India’s services sector activity expanded at its fastest pace in 15 years in August, driven by surging demand, but the acceleration also fueled price pressures that intensified to the strongest level in more than a decade, a private survey showed on Wednesday.The data further highlighted that Asia’s third-largest economy grew at a better-than-expected 7.8 per cent in the June quarter,but higher US tariffs pose a looming risk to growth.HSBC’s India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, surged to 62.9 in August from 60.5 in July, though it was below the preliminary reading of 65.6. A reading above 50 indicates expansion, while one below signals contraction.“India's services PMI Business Activity Index reached a fifteen-year high last month on the back of surging new orders,” stated Pranjul Bhandari, chief India economist at HSBC.
New business a key measure of demand expanded at the sharpest pace since June 2010, boosted by strengthening international orders that recorded their strongest increase in 14 months.Robust demand also allowed service providers to pass on higher input costs to consumers more aggressively. Output price inflation climbed to its highest since July 2012, while input costs rose at the fastest rate in nine months,noted experts.However,the sharp rise in service prices suggests broader inflation may have already bottomed out. Overall inflation had eased to an eight-year low of 1.55 per cent in July, but economists now caution it may start rising again.“Intensifying price pressures could mean inflation has reached its trough,” analysts noted, highlighting a risk for policymakers aiming to balance growth and price stability.
Besides,business confidence for the year ahead strengthened to a three-month high, with firms citing planned marketing spends and robust demand forecasts. However, employment growth in the sector remained modest despite the buoyant conditions.Reflecting broad-based momentum, the Composite PMI, which covers both manufacturing and services activity, climbed to 63.2 in August, the highest in 17 years, up from 61.1 in July,according to information.

(Business Correspondent)