New Delhi

India’s services sector recorded its fastest expansion in five months in April, supported by stronger domestic demand, rising business activity and robust order inflows, according to the latest HSBC India Services Purchasing Managers’ Index (PMI) released on Wednesday.

The seasonally adjusted Services PMI Business Activity Index climbed to 58.8 in April from 57.5 in March, marking the strongest pace of growth since November last year. In PMI terms, a reading above 50 indicates expansion, while a figure below that level signals contraction.

Survey participants reported that competitive pricing strategies, growing e-commerce activity, and strong demand for logistics and relocation-related services helped drive sales during the month.

According to HSBC Chief India Economist Pranjul Bhandari, the April data points to a clear strengthening in domestic consumption even as overseas demand softened.

She said growth in business activity and fresh orders accelerated during the month, while export demand moderated, suggesting that demand is increasingly shifting from international markets toward domestic consumers amid continuing tensions in West Asia.

The survey showed that export orders for Indian service providers lost momentum in April, with respondents citing geopolitical instability in the Middle East and weaker inbound tourism as factors affecting international business.

On the cost front, service providers continued to face significant input price pressures, although the pace of inflation eased compared with March. Businesses reported higher expenses linked to food items, cooking gas, labour, and supply shortages.

Despite elevated operating costs, companies passed on only part of the burden to customers, resulting in a slower rise in selling prices and the weakest output price inflation in three months.

Bhandari noted that while input cost pressures remained high, firms appeared cautious about fully transferring these expenses to clients, choosing instead to absorb part of the cost increases.

Looking ahead, service sector companies remained optimistic about growth over the next 12 months, though confidence softened from the previous month due to concerns over geopolitical developments and persistent cost pressures.

Employment trends remained positive, with businesses adding workers at the beginning of the new financial year. Respondents said higher volumes of incoming work encouraged hiring, particularly among junior staff and short-term employees.

Meanwhile, the HSBC India Composite PMI Output Index—which combines manufacturing and services activity—rose to 58.2 in April from 57.0 in March, indicating continued strong private sector expansion, although the pace remained among the slowest seen in the past two-and-a-half years.

READ MORE: Shah Taj Khan: The scribe who brought Science fiction to Urdu

The survey, compiled by S&P Global, is based on responses from around 400 companies across sectors including transport, finance, communication, real estate, insurance, and business services.