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Despite staying strong in the month of May, India’s growth in services sector activity slowed to a five-month low due to weakened domestic demand, fierce competition, price pressures and heat waves that affected livelihoods across the country. Even with the slow pace of growth, exports grew at a record pace and job creation rose to a 21-month high. The sector also remained above the 50 mark separating growth from contraction for the 34th straight month, a private survey showed on Wednesday.

As per the May data, the robust increases in new business intakes continued to underpin output growth across India’s service economy, though the seasonally adjusted HSBC India Services Business Activity Index fell to 60.2 in May from 60.8 a month earlier, showing its lowest mark since last December.



“Survey participants attributed the figures to domestic new orders easing slightly while remaining robust, implying strong demand conditions and successful advertising,” the survey noted. The survey also showed that rising sales, productivity gains, and demand strength reported the growth. However, the upturn was somewhat hampered by competitive and price pressures.

“India’s service activity rose at a slightly softer pace in May, with domestic new orders easing slightly, but remaining robust, implying strong demand conditions and successful advertising,” said Maitreyi Das, Global Economist at HSBC. On the price front, Das also said that cost pressures ticked up in May led by highe.

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