India's service sector PMI rises to 51.8, composite PMI to 53.5 in Feb

India’s services sector output increased to 51.8 in February from 51.5 in January, pointing to a moderate rate of expansion, as per a report by IHS Markit. Greater bookings, better demand conditions and the retreat of the pandemic drove this moderate expansion. 

Meanwhile, the composite PMI output rose to 53.5 in February from 53.0 in January, signalling a solid rate of expansion that was nonetheless below its long-run average, the IHS Markit stated. 

“Growth in the service sector failed to rebound as meaningfully as many would have hoped given that COVID-19 cases receded considerably from January's new wave and restrictions were lifted. New business and services activity expanded only modestly, and at the second-slowest rates since last July. Looking at the anecdotal evidence supplied by survey participants, inflationary pressures, input shortages and the local elections dampened growth,” said Pollyanna De Lima, Economics Associate Director at IHS Markit. 

Services sector output

The services sector moved up a gear from January as COVID-19 cases declined and restrictions were lifted. Both new business and output rose at quicker rates but were still below their respective long-run averages, IHS Markit stated in the report. While there was an uptick in business sentiment, job shedding took place too. Input costs and output prices increased at a softer rate.  

There was a faster increase in new business inflows to service providers but it was weaker than seen on average over the survey history. Many firms stated that marketing efforts, demand resilience and new client win boosted sales but growth was hampered by input shortages, the pandemic and local elections. 

International demand for Indian services remained subdued in February.

“Relatively weak growth of new business and a lack of pressure on capacity led some companies to reduce headcounts in February. The latest fall in employment was the third in successive months and the fastest since July 2021,” stated the report. Operating expenses were higher in February and charges by service providers were revised upwards in February. The rate of output inflation softened to a five-month low.

Business confidence strengthened in February but the overall degree of optimism was historically muted.

Composite PMI

Growth of private sector output recovered some of the ground lost in January, stated the report. While the rate of expansion quickened in both manufacturing and services, the former saw a stronger uptick. 

“Similarly, new orders increased at quicker rates among services companies and goods producers, with the latter seeing the sharper rise. At the composite level, the rate of expansion remained below trend, despite improving from January's six-month low,” stated the report.

Private sector employment continued to decline but at a modest rate. Both manufacturing and services economies saw job shedding. Input cost inflation at the composite level subsided to a five-month low in February, the report added.

Also read: India’s service sector PMI slows to 51.5, composite PMI to 53 in Jan