The seasonally adjusted S&P Global India Services PMI Business Activity Index rose from 56.4 in November to 58.5 in December, highlighting the strongest rate of expansion since mid-2022.
December data highlighted an improvement in the health of the Indian service sector, with a quicker upturn in new business boosting output growth. More jobs were created and companies remained strongly upbeat towards the year-ahead outlook for business activity. There was a sharp rise in firms' expenses amid greater energy, food, staff and transportation costs which led to a further increase in prices charged for the provision of services.
The finance & insurance segment recorded the quickest increase in output, whereas real estate & business services propped the rankings.
Pollyanna De Lima, economics associate director at S&P Global Market Intelligence, said: "December saw a welcome expansion in Indian services activity, underscoring the resilience of demand as 2022 came to an end.
As we head into 2023, companies signalled strong optimism towards the outlook for output. Around 31% of panellists forecast growth, while only 2% anticipate a contraction.
"Positive sentiment and ongoing growth of new business continued to support job creation, but there were areas where capacities were reportedly adequate to cope with current requirements. "Inflation trends were mixed, as input prices rose at a faster pace and the upturn in charges moderated. On the expense front, services firms reported pressure from energy, food, staff and transportation costs. Although easing from November, the rate of output charge inflation remained elevated as several companies felt the need to transfer escalating costs through to clients."
Meanwhile, the S&P Global India Composite PMI Output Index rose from 56.7 in November to 59.4 in December, highlighting the quickest rate of growth since January 2012.
Indian private sector firms signalled a strong performance at the end of 2022, with manufacturers and service providers recording faster expansions in output.