The S&P Global PMI survey for India's services sector shows growth in the sector strengthened further in April, with the survey's main business activity index rising from 57.8 in March to 62.0, its highest level since 2010. The manufacturing sector PMI, published earlier in the week, also showed an improvement in conditions, with its main index increasing from 56.4 to 57.2. The composite index covering both sectors advanced from 58.4 in March to 61.6 in April, also its highest level since 2010.

Despite leaving policy rates on hold at their most recent meeting last month, officials at the Reserve Bank of India advise that they"remain focused" on withdrawing policy accommodation. The greater strength in economic conditions shown in the PMI surveys this week suggests that the need to curb inflation will remain the major focus for officials in upcoming meetings and will likely reinforce the case for further policy tightening.

Respondents to the service sector survey reported stronger growth in output, new orders, and new export orders in April but another month of little change in payrolls. The survey's measure of business confidence also improved. Respondents reported stronger growth in input costs in April and a bigger increase in selling prices.

The Services Purchasing Managers' Index (PMI) is a joint publication by Markit and the Nikkei media organisation and provides an estimate of business activity in private sector services for the previous month by using information obtained from a representative sector survey incorporating around 800 companies. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting).

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the Markit PMIs, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.

The survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month. For each of the indicators the report shows the percentage reporting each response, the net difference between the number of higher/better responses and lower/worse responses, and the diffusion index. This index is the sum of the positive responses plus a half of those responding the same.

The Purchasing Managers' Index (PMI) survey methodology has developed an outstanding reputation for providing the most up-to-date possible indication of what is really happening in the private sector economy by tracking variables such as sales, employment, inventories and prices. The indices are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries use the data to help make interest rate decisions. PMI surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies.