NEW DELHI, Dec 4: India’s service sector maintained its strong performance in November 2024, marking a remarkable milestone with employment in the sector recording its highest growth rate since the inception of the survey in 2005.

According to Pranjul Bhandari, Chief India Economist at HSBC, “During November, services sector employment notably grew at the fastest pace ever recorded since this survey began in 2005. 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.”

The HSBC India Services Business Activity Index, compiled by S&P Global, registered a solid 58.4 for November, slightly down from 58.5 in October, reflecting a sharp rate of expansion that remains well above the historical average. This growth was supported by strong domestic and international demand, as well as gains in new business, even though the growth in total sales eased marginally compared to October. However, the sales index remained significantly above its long-term trend.

The surge in employment, particularly in the services sector, was driven by sustained demand strength, leading to higher output and a significant increase in job creation. Employment growth was attributed to both permanent and temporary hires, further signaling optimism within the sector.

However, the robust employment expansion came with a cost. Input price pressures intensified, with costs rising at their steepest rate in 15 months due to higher food and labor expenses. These increased costs were passed on to customers, with output prices climbing at the fastest pace in nearly 12 years. Service providers reported that strong demand conditions supported these price hikes.

In addition, pending workloads grew at their fastest pace in six months as businesses struggled to meet the rising demand. Despite these challenges, firms remained optimistic about the future, with confidence reaching its highest level since May 2024. Expectations of continued demand strength and effective marketing strategies were cited as the main drivers behind this positive outlook.

The services sector also saw a solid increase in new export orders, marking the fastest growth in three months. Gains were reported from clients in Asia, Europe, Latin America, and the United States, although the pace of international demand growth was slower than mid-year levels.

The HSBC India Composite Output Index, which measures activity across both manufacturing and services, stood at 58.6 in November, slightly down from 59.1 in October. Despite the dip, the index continues to indicate robust growth in the private sector.

Notably, the services sector outperformed manufacturing in terms of employment growth and cost pressures. Service providers reported sharper increases in input and output prices compared to manufacturers, driven by labor costs and broader inflationary pressures.