Bengaluru, Feb 4 - Activity in India's largest economic sector picked up in January after a dip in December, according to a private-sector survey. HSBC's India Services Purchasing Managers' Index (PMI), compiled by S&P Global, climbed to 58.5 in January from 58.0 in December.
The January reading extended a run of expansion to 54 consecutive months, the longest sequence recorded since the survey began in 2005, but it came in below the preliminary estimate of 59.3.
The improvement in overall activity was led by an acceleration in new business, a primary indicator of demand, which expanded at its quickest pace since November. Firms participating in the survey pointed to a stronger online presence and more aggressive marketing as factors that supported sales growth.
"Robust output growth was driven by a steady influx of new orders, including increased international demand from South and Southeast Asia," said Pranjul Bhandari, chief India economist at HSBC.
Export demand also provided support. New export business rose at its fastest rate in three months, with respondents identifying increased orders from Indonesia, Qatar, Sri Lanka and Vietnam. The survey window ran from January 9 to January 28.
Recent policy and trade developments were noted in the survey backdrop. Late in the previous month, India signed a trade agreement with the European Union. Additionally, on Monday U.S. President Donald Trump announced an agreement to cut U.S. tariffs on Indian goods to 18% from 50%, developments that the survey noted as potential upside for exports in the months ahead.
Despite the stronger demand signal, employment trends remained subdued. After contracting in December, employment returned to growth in January, but the rate of job creation was only marginal and hovered just above the 50.0 threshold, indicating near-stagnant labour market conditions within the sector.
Inflationary pressures in the services sector edged higher in January. Input costs rose at their fastest pace since September, driven by higher prices for food, electronics and paper. Service providers responded by passing on part of the increased costs to customers, pushing output charges up to a three-month high.
Looking ahead, business sentiment improved. Firms reported a rise in confidence about the year-ahead outlook to a three-month high, citing expectations of efficiency gains and the potential to win new clients.
Reflecting the combined momentum across the economy, the HSBC India Composite PMI - which combines services and manufacturing data - increased to 58.4 in January from 57.8 in December.
Methodological note: The PMI figures referenced in this report are drawn from the HSBC India Services PMI compiled by S&P Global, based on survey data collected between January 9 and January 28.