Service sector growth cools in May, on competitive and price pressures

India's services sector growth cooled in May, posting the weakest rises in new business and output for five months despite exports growing to greatest extent in series history as price pressures ticked higher, taking the seasonally adjusted HSBC India Services Business Activity Index down from 60.8 in April to 60.2, its lowest mark since last December.

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The index, however, remained comfortably above the neutral mark of 50.0 in May, highlighting a sharp upturn in output. Growth was reportedly supported by rising sales, productivity gains and demand strength. The upturn was somewhat hampered by competitive and price pressures.

The May data showed robust increases in new business intakes continuing to underpin output growth across India's service economy, according to the HSBC PMI®. Rates of expansion eased to the slowest in the calendar year-to-date, however, amid fierce competition, price pressures, and a severe heatwave. Both input costs and output charges rose to greater extents. Concurrently, new orders from international markets expanded at the steepest pace since the inception of this series nearly 10 years ago. Another positive was a rebound in business confidence to its strongest in eight months.