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NEW DELHI: India’s crucial services sector expanded at its fastest pace in 11 years as demand conditions strengthened but price pressures continued to pose a concern, a survey showed on Tuesday.
Rising from 58.9 in May to 59.2 in June, the S&P Global India Services PMI business activity index was at its highest mark since April 2011 and signalled a steep rate of increase. The acceleration in growth was broad-based across the four monitored sub-sectors. According to panellists, the upturn stemmed from ongoing improvement in demand following the retreat of pandemic restrictions, capacity expansion and a favourable economic environment. The survey is compiled from responses to questionnaires sent to a panel of around 400 service sector companies.
Although firms expect the recovery to be sustained over 12 months, concerns surrounding price pressures restricted business confidence. Input costs continued to rise at a historically elevated pace, although one that was the slowest in three months, while charge inflation hit a near five-year high, according to the survey. The vital services sector had been hit hard by the Covid-19 pandemic waves as curbs imposed to prevent the spread of the deadly virus shuttered shopping malls, hotels, restaurants and hurt tourism and travel.
“Consumer services posted the strongest increases in both output and new orders in June, but growth rates quickened across the board. Cost pressures in the service economy remained stubbornly high in June, despite easing to a three-month low. With companies retaining significant pricing power, owing to robust demand conditions, output charge inflation climbed to a near five-year peak,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

Services firms noted a substantial upturn in new work intakes at the end of the first fiscal quarter, with the rate of increase improving to the best in over 11 years.
Firms were able to secure new orders despite charging more for their services. June data showed the fastest rise in selling prices since July 2017 as several companies sought to transfer part of their additional cost burdens to clients.
Unrelenting inflation continued to concern businesses.
“The jump in the services PMI corroborates our view that the services sector will lead the growth recovery in FY2023. Middle-to-high income households are likely to prioritise spending on contact-intensive services, that were avoided during the pandemic, at the cost of consumer durables. This is likely to result in a slower improvement in capacity utilisation levels, modestly delaying the private sector’s capex plans amidst the global headwinds and elevated commodity prices,” said Aditi Nayar, chief economist at ratings agency ICRA.





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