India’s Services PMI saw a dip and posted 54.3 in September, following August’s rise, suggesting a loss of growth momentum owing to price pressures, unfavourable public policies, and an increasingly competitive environment. The seasonally adjusted S&P Global India Services PMI Business Activity Index fell from 57.2 in August to 54.3 highlighting the weakest rate of expansion since March 2022. The data, however, reflected sustained economic growth, the S&P Global report noted. The data also showed continued revival in business confidence, with sentiment rising to its highest level in over seven-and-a-half years. New business inflows and outputs also rose, albeit marginally.
“The Indian service sector has overcome many adversities in recent months, with the latest PMI data continuing to show a strong performance despite some loss of growth momentum in September,” said Pollyanna De Lima, Economics Associate Director, S&P Global Market Intelligence. Lima also highlighted increase in new businesses and output as companies accelerated employee intake to meet rising demand. However, the rise in employment was slower than it was in August. The fastest expansion, among various sectors, was seen in consumer services, while the slowest was seen in Transport and Information & Communications. International orders further declined in September, weighing on overall sales growth.
Addressing the input cost inflation, Lima said, “September also saw a broad stabilisation of input cost inflation and the slowest upturn in prices charged for the provision of services since March. However, the steep depreciation of the rupee seen towards the end of the month due to interest rate hikes in the US presents additional challenges to the Indian economy.” Higher energy, food, material, and labour costs pushed the operating expenses of service providers a little further in September. The overall rate of inflation did not deter much from August’s level. Lima, in the report, stated that the RBI will continue to hike interest rates to “protect the rupee and contain price pressure.” Lima also added, “An upturn in inflation could damage consumer spending, dampen business confidence and test the resilience of the Indian service sector in the coming months but, at least for September, service providers were strongly upbeat towards growth prospects.”
Private sector output growth slowest in six months
The S&P Global report highlighted a loss of momentum in output growth in the private sector. The S&P Global India Composite PMI Output Index marginally slumped to 55.1 to 58.2 in August. The most substantial slowdown was witnessed in the services economies. Manufacturing, too, saw a softer increase in September. The rise in selling prices was the weakest in six months. The aggregate rate of input cost inflation was at a 22-month low in September on the back of broad-based slowdowns in services and manufacturing, the report added. Manufacturers, however, saw a stronger upturn.