The S&P Global PMI survey for India's services sector shows conditions moderated but remained very strong in August, with the survey's main business activity index falling to 60.1 from 62.3 in July, which was its highest level since 2010. The manufacturing sector PMI, published last week, showed stronger growth, with its main index advancing from 57.7 to 58.6. The composite index covering both sectors fell to 60.9 in August from 61.9 in July, which was also its highest level since 2010. This ongoing strength in activity will likely keep the Reserve Bank of India's focus on the inflation outlook ahead of its next policy meeting early October.

Respondents to the service sector survey reported output and new orders grew at a strong but somewhat less pronounced pace in August, while new export orders rose at the fastest pace since this reading was initiated in 2014. The survey shows that payrolls were increased at a faster pace in August while its measure of business confidence rose to its highest level so far this year. Respondents reported another month of strong growth in input costs 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.