India's Services Sector Hits Record Employment Growth Amid Rising Costs

In November 2024, India's service sector saw unprecedented employment growth, despite rising input and output costs. HSBC India's PMI highlighted robust expansion, driven by strong domestic and international demand. Businesses remained optimistic, with employment reaching new heights since 2005, supported by increased domestic and international orders.

November 2024 marked a significant milestone for India's service sector, as it recorded the fastest employment growth since the commencement of the HSBC survey in 2005. This surge in hiring underscores heightened business confidence, attributed to an increase in new orders and vigorous international demand, according to Pranjul Bhandari, Chief India Economist at HSBC.

Despite a slight dip to 58.4, the HSBC India Services Business Activity Index indicated a robust expansion, highlighting strong demand both domestically and internationally. The data, adjusted for seasonal variations, was a strong indicator of growth above historical averages, even as new business activities surged.

Employers in the services sector responded to persistent demand by boosting job creation at record speeds, combining permanent and temporary hires. However, this expansion came at a cost, as input prices, particularly food and labor, saw their steepest rise in 15 months, leading to the highest increase in output prices in nearly 12 years.

Service providers, grappling with increasing workloads, managed to transfer some of these rising costs to customers, thereby hiking output prices. Despite these challenges, companies remain positive about the future, marking their highest confidence level since May 2024, driven by effective marketing strategies and continued strong demand.

Additionally, the fastest growth in export orders in three months was witnessed, with significant gains from regions including Asia, Europe, Latin America, and the US. Nevertheless, the international demand pace had slowed compared to the mid-year levels.

Overall, the HSBC India Composite Output Index maintained a robust 58.6 in November, slightly below October's 59.1 but indicative of strong private sector growth. Notably, the services sector outpaced manufacturing in employment and cost pressures, as employers faced sharper input and output cost increases due to inflationary pressures.

(With inputs from agencies.)