Services sector sees sharp upturn in August

India's services sector activity witnessed a sharp upturn in August on the back of stronger gains in new business, ongoing improvements in demand conditions and job creation, a monthly survey said on Monday.

The seasonally adjusted S&P Global India Services PMI Business Activity Index rose from July's four-month low of 55.5 to 57.2 in August, amid a quicker upturn in business activity and the sharpest rise in employment for over 14 years.

For the thirteenth straight month, the services sector witnessed an expansion in output.

In Purchasing Managers' Index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction.

"The pick-up in growth stemmed from a rebound in new business gains as firms continued to benefit from the lifting of COVID-19 restrictions and ongoing marketing efforts," said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.

Forecasts regarding the year-ahead outlook for output were revised higher, with optimism at its greatest degree since May 2018.

"Services companies expect output growth over the coming 12 months, with sentiment rising to its highest level in over four years.

"Optimism was centred on forecasts of ongoing improvements in demand and planned marketing," the survey said.

On the employment front, the combination of strong sales and upbeat growth projections underpinned a substantial increase in payroll numbers across the service sector.

"The rate of job creation picked up to the strongest in over 14 years.

"Employment trends improved in each of the four monitored sub-sectors," the survey said.

Lima further noted that "with demand showing considerable resilience, service providers maintained a degree of pricing power and lifted selling prices amid the transfer of cost increases to customers.

"While the rate of charge inflation was broadly similar to July, there was a considerably softer upturn in input costs.

"The latter rose at the weakest pace in close to a year," Lima said.

The Reserve Bank of India's Monetary Policy Committee (MPC), at its meeting from August 3-5, had decided to increase the benchmark lending rate by 50 basis points to 5.40 per cent.

As per the minutes of its recent policy meeting, with the price situation remaining at "unacceptably and uncomfortably" high level, members of the RBI's MPC underlined the need for preventing upward drift of inflation and bringing it down to the target band.

The next meeting of the MPC is scheduled for September 28-30, 2022.

Meanwhile, the S&P Global India Composite PMI Output Index -- which measures combined services and manufacturing output -- rose from 56.6 to 58.2, indicating a sharp pace of expansion.

New work intakes increased at quicker rates in the manufacturing and service sectors, leading to the fastest upturn at the composite level for nine months.

Indian private sector jobs expanded to the greatest extent in over 14 years midway through the second fiscal quarter.

The upturn was driven by a substantial acceleration in growth across the service economy, while manufacturers registered a broad stabilisation of payroll numbers.