Strong Growth in India's Services Sector

India's services sector experienced its strongest growth in four months during December, driven by a significant increase in new business inflows and a reduction in inflationary pressures. The seasonally adjusted HSBC India Services Business Activity Index rose to 59.3, up from 58.4 in November, marking the highest expansion since August.

Optimistic Business Sentiment

Ines Lam, an economist at HSBC, highlighted the strong optimism among India's services companies, with forward-looking indicators suggesting continued strong performance. Despite increased costs for food, labor, and materials, the overall rise in input costs slowed, leading to a softer increase in selling prices and supporting positive business sentiment.

Contrast with Manufacturing Sector

While the services sector shows robust growth, signs of a slowdown in the manufacturing industry are evident. India's manufacturing sector growth slowed to a 12-month low in December, with weaker expansions in new orders and production.

Employment and Future Outlook

Service providers remain optimistic about the next 12 months, with employment growth remaining strong since data collection began in December 2005. The private sector also posted faster growth, with the HSBC India Composite Output Index climbing to 59.2 in December from 58.6 in November.