India's service Purchasing Managers' Index (PMI) was recorded at 61.2 in May. According to S&P Global, although it is lower than 62 in April, May's figure is the second-highest since June 2010.
A print above 50 in the survey denotes expansion of services activity, and below that suggests contraction. India's headline figure has been in the expansion zone for 23 months since August 2021.
"The PMI data for May stand as a compelling testament to prevailing demand resilience, impressive output growth and job creation within India's dynamic service sector," said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.
The external demand for Indian services continued to improve in May, highlighted by a fourth successive rise in new export business. Moreover, the pace of expansion was the quickest in the calendar year-to-date (YTD).
Inflation, however, continues to be a worry. Indian service providers reported higher food, input, transportation and wage costs in May. According to S&P, the overall input prices rose at a marked rate that was the fastest since last December and above its long-run average.
"Faced with the delicate task of balancing these increases and maintaining affordable prices for consumers, firms opted to lift selling prices again in May. Worryingly, the survey showed the joint-fastest upturn in output charges for nearly six years," De Lima added.
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She also said that with policymakers closely monitoring inflation developments, it might take some time for them to go for interest rate cuts.
Composite PMI unchanged
The composite PMI, including the manufacturing and the services sector, remained unchanged at 61.6 per cent in May.
"The healthy demand environment contributed to job creation at goods producers and service providers. At the composite level, employment rose at the quickest pace in 2023 so far," it said.
Earlier this month, the manufacturing PMI for May was recorded at 58.7, the highest in 31 months. It was attributed to an expansion in input stocks and a rise in new orders and output.