Growth in India’s dominant services sector declined to a 10-month low in September, driven by a slowdown in demand as new business, international sales, and output all rose at the slowest rates since late 2023, a private business survey revealed on Friday.
The headline Purchasing Managers’ Index (PMI) figure, released by HSBC and compiled by S&P Global, declined to 57.7 in September from 60.9 in August. The index, however, remained above the neutral 50 mark, which separates contraction from expansion, for the 38th straight month.
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“Among the main positive outcomes seen in September were solid job creation, strengthening business confidence, and the weakest uptick in selling prices in over two-and-a-half years,” the survey added.
The survey noted that several panellists attributed the increase in output to new business gains, positive demand trends, and investment in technology, while growth was curbed by fierce competition, cost pressures, and changes in consumer preference (i.e., a switch to online services).
Similarly, new business intakes expanded sharply at the end of the second financial quarter, but the pace of growth retreated to a 10-month low. Where an increase was noted, survey participants remarked on healthy demand conditions. Those that experienced challenges commented on fresh entrants and greater competition.
Pranjul Bhandari, chief India economist at HSBC, said that India’s services PMI data showed the services sector expanded at a slower pace in September, and the new business index followed a similar trajectory as the headline figure, indicating the possibility of softer output growth in the coming months.
“Services companies’ margins have likely been squeezed further, as prices charged rose at a slower pace when input cost inflation intensified. A long period of robust new business growth has led to strong labour demand,” she added.
On the export front, there was a softer increase in new export orders, and the rate of expansion moderated to the weakest in 2024 so far.
“Still, some firms noted gains from Asia, Europe, North America, the Middle East, and the US,” the survey noted.
On the employment front, the survey showed that the solid increase in services employment seen since May was extended to September, as service providers reported the recruitment of full- and part-time workers, with both permanent and temporary contracts being offered.
Fierce competition somewhat restricted charge inflation across India’s service economy in September. Output prices still rose, but did so to the smallest degree in over two-and-a-half years. Cost pressures were more pronounced in the consumer services segment, but it was in finance and insurance that the fastest rise in selling prices was recorded.
First Published: Oct 04 2024 | 4:49 PM IST
