India's services sector grew at a faster pace in May, supported by strong demand and a rise in new business orders.
The Purchasing Managers’ Index (PMI) for services increased to 59.8 in May from 58.8 in April, according to S&P Global.
A PMI reading above 50 indicates expansion compared with the previous month.
Business activity expanded further in May as new orders continued to rise, said Pranjul Bhandari, Chief India Economist at HSBC.
Demand from overseas clients also improved, recovering after a sharp decline in April. At the same time, input cost inflation eased, reducing pressure on companies to increase prices.
S&P Global said stronger demand for freight, digital solutions, e-commerce, entertainment and IT services contributed to the higher PMI reading.
The growth in these segments also supported employment. Job creation remained solid and was the second-fastest in nearly a year, although fewer than 7% of surveyed firms reported increasing staff numbers, while most companies kept their workforce unchanged.
Cost pressures across the services sector remained elevated but eased to their lowest level in four months. This allowed companies to raise selling prices at the slowest pace since January.
Meanwhile, outstanding business volumes saw only a marginal increase during May, with the relevant index remaining just above the neutral 50 mark.
Looking ahead, services firms remained optimistic about business activity over the next 12 months, expecting favourable demand conditions to support growth.
However, overall confidence slipped to a three-month low and remained below the historical average.
Among the various segments, consumer services emerged as the strongest performer.
Growth in both new business and output in this category outpaced that of other sub-sectors. Consumer services also recorded the sharpest increases in input costs and prices charged to customers.
The index is based on responses from around 400 companies across sectors such as transport, finance, insurance, real estate, information and communication, and business services.
