The Purchasing Managers’ Index (PMI) for services moderated to 60.8 in April against 61.2 in March due to a marginal dip in export orders. However, S&P Global, the agency which prepares HSBC Services PMI, said the growth of new business and output remained sharp and among the fastest in 14 years.

Services has maximum share in gross value added (GVA) with over 53 per cent. The PMI is prepared with the help of responses from purchasing executives of 400 firms. The sectors covered include consumer (excluding retail), transport, information, communication, finance, insurance, real estate and business services. Index above 50 means expansion while below 50 refers to contraction.

Commenting on latest reading, Pranjul Bhandari, Chief India Economist at HSBC, said: “India’s service activity rose at a slightly softer pace in April, backed by a further rise in new orders, with a notable strength in domestic demand. Although new export orders remained robust, they showed a slight moderation from March figures.”

On job scenario, the report accompanying PMI said that buoyed by rising inflows of new business, a few service providers in India showed an increased appetite for new hires in April. However, with several companies indicating that payroll numbers were sufficient for current requirements, the rate of job creation was marginal and softer than that seen at the end of the previous fiscal year.

Also read: Manufacturing PMI drops to 58.8 in April

“In response to increased new orders, firms expanded their staffing levels, though the pace of hiring growth decelerated,” Bhandari said.

On the key issue of inflation, the reported noted that though it was lower than that of March, it still impacted the margin of firms, as only part of the price rise was passed on to clients through output charges. Amid reports of higher input (particularly fruits and vegetables) and labour costs, operating expenses continued to increase in April.

“The overall rate of inflation pulled back since March and was broadly aligned with its long-run average. The consumer services segment saw by far the sharpest increase in input costs,” the report said.

It may be noted that the headline inflation came down in March to 4.85 per cent so as food inflation. However, food inflation, led by vegetables, still ruling high at 8.52 per cent and expected to remain high during next few months on account of weather condition. Number for April will be made public on May 13.

Meanwhile, the PMI report highlighted that outstanding business increased for the 28 consecutive month in April, albeit at a slight pace. This was softer than in March and broadly aligned with the average over this sequence. Confidence among service providers towards the year-ahead outlook for business activity improved to a three-month high. Marketing efforts and efficiency gains, alongside plans to price competitively and predictions that demand conditions will remain favourable, boosted optimism.

“Overall confidence among service providers for the year-ahead outlook improved markedly, bolstered by resilient demand conditions,” Bhandari concluded.