February saw growth in India's service sector as strong demand trends bolstered sales and corporate activities. Growth rates have been declining since January, but they are still historically high. The most recent HSBC PMI also revealed the lowest increase in selling charges in two years and the second-weakest cost pressures in the industry since August 2020.

The HSBC India Services Business Activity Index, which is seasonally adjusted, decreased from 61.8 in January to 60.6 in February. The headline index showed a strong pace of expansion that was significantly higher than the series history (since December 2005), even though it had declined. It was also comfortably above the neutral threshold of 50.0.

Businesses increased employment as a result of increased workloads, but employment growth was slowed by a reduction in capacity constraints and a decline in optimism about the future.

All segments of the service industry saw an increase in business activity, according to detailed data. The fastest-growing industries were finance and insurance, while real estate and business services had the weakest growth.

"India's services PMI suggests that the pace of expansion in the services sector eased in February from January," HSBC economist Ines Lam stated. The forecast for future business activity for services businesses worsened significantly, albeit still being very optimistic, due to a slowing in the development of new orders and output. The inflation of raw costs decreased, and service prices increased at the weakest rate in 24 months."

According to data from February, there was an increase in demand for services overall, as new business inflows increased for the thirty-first consecutive month. Nevertheless, similar to output, the pace of growth decreased from its recent peak in January but remained significantly higher than its long-term normal. 

For the twelfth consecutive month, new business from outside India was placed with Indian service providers. Participants in the survey shared their gains from the United Arab Emirates, Australia, Asia, and Europe. All things considered, overseas sales grew at a strong rate that was among the strongest in the nine and a half-year history of the series.

Overall output increases at a Slower but nonetheless Rapid Rate

The Indian industrial and service sectors both saw growth in February, which led to an increase in private sector output. A slower but still significant rate of growth was seen in the HSBC India Composite PMI Output Index, which dropped from a six-month high of 61.2 in January to 60.6.

Sales growth in the private sector also continued to be strong despite a slowdown since January. Manufacturers and services companies both experienced relatively equal rates of expansion; however, the former saw an acceleration and the latter a decline.