India's services sector eases; employment growth fastest since 2005

India's services PMI marginally dipped to 58.4 in November while employment in the segment recorded robust growth, a monthly survey said on Wednesday.

The seasonally adjusted HSBC India Services Business Activity Index was down marginally to 58.4 from 58.5 in October as sales increased at a softer pace.

Last month, the country's services PMI recovered from its 10-month low.

In the Purchasing Managers' Index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction.

"India posted a strong 58.4 services PMI in November, down only a fraction from the prior month's 58.5. During November, services sector employment notably grew at the fastest pace ever recorded since this survey began in 2005," Pranjul Bhandari, chief India economist at HSBC, said.

"The hiring surge reflected the sector's improving business confidence, growing new orders, and vigorous international demand.

"At the same time, high food and labour costs drove up input and output prices to their fastest rates in 15 months and nearly 12 years, respectively," Bhandari said.

Panellists of the survey continued to signal improving international demand for their services, while new export orders increased at the quickest rate in three months, but well below those seen around mid-year.

Private sector companies indicated that demand strength supported further growth of new business and output in November.

Ongoing increases in sales continued to add to capacity pressures, which led firms to hire staff at the quickest pace since comparable data became available 19 years ago.

Paired with rising input prices, labour costs exerted upward pressure on inflation.

Overall, expenses and output charges rose at the fastest rates in 15 months and almost 12 years, respectively.

This intensification of cost pressures reportedly prompted service providers to lift their own charges in November.

The month's results signalled a pick-up in capacity pressures among service providers.

Service providers were more confident regarding the year-ahead outlook for business activity.

Confidence reached its highest level since May, boosted by predictions of continued demand strength and expectations that marketing efforts will drive new business.