India’s Economy Expands with Robust Growth
India’s services sector growth surged in February, supported by rising demand and a positive business outlook. This strong performance led to a significant increase in hiring and a sharp rise in foreign orders, marking a recovery from January’s slowdown.
India’s GDP Growth Strengthened by Government & Consumer Spending
As Asia’s third-largest economy, India recorded a 6.2% year-over-year GDP growth last quarter. This expansion was fueled by higher government spending and strong consumer demand. The Indian government projects 6.5% growth for the financial year, anticipating a revival in urban consumption despite previous slowdowns due to weak job and income growth.
India Services PMI Rises Above 50, Signaling Expansion
The latest India Services Purchasing Managers’ Index (PMI), compiled by SP Global for HSBC, climbed to 59.0 in February, rebounding from January’s 26-month low of 56.5. However, it remained slightly below the preliminary estimate of 61.1. Notably, the PMI has stayed above 50, indicating consistent sector expansion since mid-2021.
Global Demand Fuels India’s Service Sector
According to Pranjul Bhandari, Chief India Economist at HSBC, global demand surged at its fastest pace in six months, playing a key role in driving India’s service sector output.
Foreign Orders & Employment on the Rise
February saw a strong rebound in overall demand, with foreign orders reaching a six-month high. To meet the growing demand, businesses expanded their workforce, leading to notable employment growth in the sector.
Inflation Remains Under Control; RBI Cuts Interest Rates
Despite a four-month low in cost price inflation, businesses raised prices to offset costs. With inflation within the Reserve Bank of India’s (RBI) 2-6% target range, the central bank cut its key repo rate to 6.25% from 6.50% in February. More rate cuts are expected to stimulate economic growth further.
Manufacturing Slows, But Services Sector Balances Growth
While manufacturing growth hit a 14-month low, the strong services sector performance helped balance the overall economy. As a result, the Composite PMI rose to 58.8 in February, up from 57.7 in January.
India’s Services Sector Poised for Future Growth
India’s services sector remains a key driver of economic expansion, supported by strong domestic demand, rising foreign orders, and increased employment opportunities. With the RBI’s policy support and positive market conditions, the sector is expected to maintain its growth momentum in the coming months.
