The services sector grew less in February, but the trend remained solid

The recent data from a private business survey indicates a slight easing in India's services sector activity during February, although the momentum has remained robust overall.

Despite the slight dip, the survey suggests that India's economy is likely to sustain its impressive growth trajectory this year.

Compiled by S&P Global, the HSBC India Services Purchasing Managers' Index (PMI) slipped to 60.6 last month, down from January's six-month high of 61.8. Nevertheless, it has consistently remained above the crucial 50-mark, indicating expansion rather than contraction, since August 2021.

Ines Lam, an economist at HSBC, noted that while the pace of expansion in the services sector moderated in February compared to January, it still remained strong. This moderation was attributed to a slowdown in the growth of new orders and output. Despite this, the outlook for future business activity among services companies, while still positive, showed a slight weakening.

Although new business softened to a six-month low, it has remained in expansionary territory for over two-and-a-half years, and international orders have demonstrated resilience.

However, the survey indicates a less optimistic outlook for the next 12 months, with business sentiment reaching its lowest level since November. Hiring slowed down, and employment growth was minimal. On a positive note, firms experienced some relief from inflationary pressures, with operating costs rising at the slowest pace since December. This was reflected in the prices charged, which rose at the slowest rate in two years.

While India's manufacturing industry recorded its fastest growth in five months in February, the relatively slower expansion in services activity led to a marginal decline in the HSBC India Composite PMI Output Index to 60.6 in February from the previous month's 61.2.

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