India’s Services Sector Continues To Expand But Growth Slows To 10-Month Low In September As Demand Softens—All About It

India's thriving services sector continued its expansion, although growth tapered off to a 10-month low in September due to reduced demand, according to a business survey released on Friday (4 October).

The HSBC final India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, dropped to 57.7 in September, down from a five-month peak of 60.9 in August, and below the preliminary estimate of 58.9.

"The headline business activity index fell below 60 for the first time in 2024, but we note that at 57.7, it was still much above the long-term average," said Pranjul Bhandari, chief India economist at HSBC.

Notably, the index has stayed above 50, indicating expansion, for over three years.

The new business sub-index, a gauge for overall demand, dropped to its lowest level since November but remained above its historical average.

Meanwhile, international demand rose at its slowest pace this year.

Despite the slowdown, the business outlook for the year improved, encouraging companies to maintain their hiring momentum.

Job creation saw a slight uptick from August, marking over two years of continuous employment growth.

Cost inflation accelerated from August as prices of electricity, food and other materials increased.

However, companies passed on these higher costs to clients at the slowest rate since February 2022.

"Services companies' margins have likely been squeezed further, as prices charged rose at a slower pace when input cost inflation intensified," added Bhandari.

Inflation in India remained below the Reserve Bank of India's (RBI) medium-term target of 4 per cent in both July and August.

According to a recent Reuters poll, inflation is expected to average between 4.2 and 4.6 per cent per quarter until at least July 2026.

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