India's Services Activity Expands At Strongest Rate In Over 11 Years

India's Services activity expands at strongest rate in over 11 years while input cost inflation climbs to new record, the S&P Global India Services PMI Business Activity Index indicated.

Service sector growth continued to strengthen in May, with companies reporting the quickest increase in business activity since April 2011. The upturn was supported by a substantial pick-up in new business growth as demand continued to recover following the reopening of the economy after COVID-19 lockdowns. Meanwhile, inflation showed no signs of abating as price gauges showed an unprecedented increase in input costs and the second-fastest upturn in selling charges in just under five years. Inflation expectations continued to restrict business confidence, with optimism remaining subdued by historical standards. Posting 58.9 in May, up from 57.9 in April, the seasonally adjusted S&P Global India Services PMI Business Activity Index indicated the fastest rate of expansion in over 11 years. Anecdotal evidence suggested that the upturn in output reflected better underlying demand and strong inflows of new work.

Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said: "The reopening of the Indian economy continued to help lift growth in the service sector. Business activity rose at the quickest pace in over 11 years in May, supported by the fastest upturn in new orders since July 2011. "That said, the inflation outlook appeared to have worsened as input prices rose at the sharpest pace in the survey history. Services firms again reported substantial pressure from food, fuel, input, labour and transportation costs. Output charge inflation softened only marginally from April, being the second-highest in just under five years, as several companies mentioned the need to transfer mounting costs through to clients. "Elevated price pressures continued to restrict business optimism. Despite picking up from April, the overall level of sentiment among service providers was historically subdued. "Consumer Services remained the brightest spot of the service economy, posting the strongest increases in both new business and output during May. It was here too that the steepest rate of input cost inflation was seen."