Activity in India’s services sector rose to an 11-year high in May as new business picked up and demand recovered following the reopening of the economy after Covid-19 lockdowns, a private survey showed on Friday, even as input prices recorded an unprecedented rise.
The S&P Global Purchasing Managers’ Index (PMI) for services rose to the highest level since April 2011 to 58.9 in May from 57.9 in April with consumer services recording the sharpest increase in new orders.
A reading above 50 shows expansion and one below that indicates contraction in activity.
“The reopening of the Indian economy continued to help lift growth in the service sector… That said, the inflation outlook appeared to have worsened as input prices rose at the sharpest pace in the survey history,” said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.
May data recorded a 23rd successive month of rising input prices at Indian service providers. The rate of inflation climbed to the highest in 16-and-a-half years of data collection, according to the report.
Intensified inflationary pressures impacted business optimism and services companies continued to pass on increased cost pressures and spike in input prices to consumers by hiking prices. Businesses were concerned that inflationary pressures would dampen the economic recovery.
Service providers reported soaring operating expenses, having to bear higher costs for food, fuel, labour, material, retail and transportation.
“Inflation showed no signs of abating as price gauges showed an unprecedented increase in input costs and the second-fastest upturn in selling charges in just under five years,” S&P Global said.
Last month, the consumer services sector recorded the sharpest growth in new orders, business activity, and the highest rate of input cost inflation. The fastest increase in output charges was seen at transport, information & communication companies.