India's services sector recorded a modest improvement in August, but overall growth remained close to a four-year low as demand continued to show signs of weakness, according to the latest HSBC India Services Purchasing Managers' Index survey compiled by S&P Global.
The HSBC India Services PMI rose to 54.1 in August from 53.3 in July. However, the reading was slightly lower than the preliminary estimate of 54.5.
A Purchasing Managers' Index reading above 50 indicates expansion in economic activity, while a reading below 50 signals contraction.
Despite the improvement in the headline figure, growth in new business remained subdued. New business expanded at its second-slowest pace in more than four years, indicating that demand conditions across India's services sector remain weak.
New export orders also provided limited support, growing at broadly the same pace as in July. The August services PMI reading also remained slightly below its long-term average, highlighting the relatively modest pace of recovery in the sector.
One of the strongest signals from the survey came from employment. Services companies increased hiring at the fastest pace in 15 months, suggesting that businesses continue to see opportunities for future growth despite weaker demand conditions.
Business confidence, however, remained below its long-run average for the second consecutive month. Companies remained cautiously optimistic that market conditions and customer demand would improve in the coming months.
Price pressures also increased during August. Services companies raised prices charged to customers at the fastest pace since March as businesses passed higher operating costs on to clients.
Meanwhile, India's Composite PMI, which combines activity in the manufacturing and services sectors, remained unchanged at 54.3 in August.
The stable composite reading came as stronger growth in the services sector helped offset a slowdown in manufacturing activity. Manufacturing growth fell to a five-year low during the month, putting greater focus on the services sector as a driver of overall business activity.
While India's services sector continues to expand, the latest PMI data suggests that the pace of demand growth remains a concern. Faster hiring offers a positive signal for the labour market, but weak new business growth and subdued confidence indicate that companies remain cautious about the strength of the economic recovery.
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