Posting 58.1 in November, fractionally down from 58.4 in October, the India Services Business Activity Index pointed to the second-fastest rise in output since July 2011. The Covid-19 pandemic and travel restrictions caused a further drop in international demand for Indian services.
A reading above 50 on the index indicates expansion while below that shows contraction.
As per the survey report, although business confidence improved to a three- month high in November, the overall level of positive sentiment was well below its long-run average. Some companies expect demand to continue to trend higher, but several others were worried that elevated inflation could dampen the recovery, it said.
Moreover, the overall rate of inflation quickened from October and was the second-strongest in almost a decade, behind April.
“The recovery of the Indian service sector was extended to November, with a robust improvement in sales enabling the second-fastest rise in business activity in nearly ten-and-a-half years,” said Pollyanna De Lima, Economics Associate Director at IHS Markit, adding that companies were somewhat convinced that output levels would continue to increase in the year ahead, but worries regarding inflationary pressures weighed on confidence again.
A sister survey earlier this week showed manufacturing activity in India grew at its fastest pace in 10 months in November.
The Composite PMI Output Index signalled the strongest upturn since January 2012 and rose to 59.2 in November from 58.7 in October.
“Looking at the manufacturing and service sectors combined, the results are even more encouraging and bode well for economic performance in the third quarter of fiscal year 2022 so far,” said De Lima.
Private sector employment increased only slightly in November.