India’s Economy Sees Strong Growth
India’s services sector witnessed remarkable growth in February, driven by high demand and a positive business outlook. A recent survey revealed a significant rise in hiring and foreign orders, marking a strong recovery from January’s slowdown.
GDP Expansion Backed by Government & Consumer Spending
As Asia’s third-largest economy, India recorded a 6.2% year-over-year GDP growth last quarter. This boost came from increased government spending and consumer demand. The Indian government expects an annual growth rate of 6.5%, with hopes for a rebound in urban consumption despite previous declines due to weak employment and income growth.
PMI Rises Above Expectations
According to HSBC’s final India Services Purchasing Managers’ Index (PMI) compiled by SP Global, the index jumped to 59.0 in February, recovering from January’s 26-month low of 56.5. However, it was slightly below the preliminary estimate of 61.1. The PMI has consistently remained above 50, indicating expansion since mid-2021.
Global Demand Fuels Growth
Pranjul Bhandari, Chief India Economist at HSBC, emphasized that global demand surged at its fastest rate in six months, significantly boosting India’s services sector output.
Foreign Orders & Hiring Surge
February saw a strong recovery in demand, with foreign orders hitting a six-month high. To meet this rising demand, businesses actively hired more staff, leading to a notable expansion in employment.
Inflation & RBI’s Interest Rate Cut
Although the cost price inflation dipped to a four-month low, companies still raised prices to pass on costs to consumers. Despite inflation staying within the Reserve Bank of India’s (RBI) 2-6% target range, the central bank took action in February by cutting its key repo rate to 6.25% from 6.50%. Further reductions are anticipated to stimulate economic growth.
Manufacturing Slowdown Balanced by Services Growth
The impressive growth in India’s services sector helped offset the manufacturing slowdown, which saw a 14-month low expansion rate. As a result, the overall Composite PMI rose to 58.8 in February, up from 57.7 in January.
India’s services sector continues to play a crucial role in the country’s economic expansion, with robust demand, foreign interest, and strong hiring trends driving future growth.
