India’s services sector grew at a faster rate in January, helped by new orders, a survey conducted by HSBC said. India Services Purchasing Manager Index (PMI) for January was at 52.4, up from 51.1 in December.

Interestingly, a similar survey conducted in China showed that the services sector there grew at its slowest pace in six months.

“The January Services PMI was marked by faster expansions in activity and new orders. The weakest sectoral performance, in this otherwise encouraging data, was from financial services. Business sentiment led by anticipated improvements in demand and new commercial initiatives rose to a seven-month high,” Pranjul Bhandari, Chief India Economist at HSBC, said.

On services, survey respondents attributed the growth in new businesses to increase in activity. Service companies reported sustained growth of new business in January, extending the current sequence of expansion to nine months.

Anecdotal evidence linked higher new work inflows to solid demand conditions and marketing initiatives. Among the sub-sectors, activity rose the fastest in ‘Other Services’, while the sharpest decline occurred in Financial Intermediation.

Indian services and manufacturing PMIs give a hint about data released by the Centre with a time lag. Services has the largest share in Indian Gross Domestic Product and currently contributes around 57 per cent to it. Manufacturing has about 16 per cent share.

Inflation On the inflation front, Bhandari said that both input and output prices rose further, though at a modest pace when compared with historical trends. “We expect the RBI to cut rates by a total of 75 basis points in 2015, but no further as latent inflation pressures could pick up when growth sees a meaningful lift,” he said.

Combined with manufacturing index (released on February 2), composite PMI output index rose to 53.3 in January from 52.9 in December. This signalled further growth of private sector output in January.

Manufacturing output The latest increase was healthy overall, albeit weaker than the historical average. Manufacturing output continued to rise faster than service sector activity at the start of 2015.

The services index is prepared on the basis of response received from 350 purchasing managers of private companies. These companies comprise hotels & restaurants, transport & storage, financial intermediation, renting & business activities, post & telecommunication and other services. The index above 50 reflects expansion while below 50 it means contraction.

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