India’s services sector remained robust but dropped to a 10-month low as the HSBC India Services Business Activity Index, or services PMI stood at 57.7 in September on slowed demand, data released by S&P Global showed. Falling from a five-month high of 60.9 in August, the headline figure signalled a softer albeit still historically-robust rate of expansion. According to several panel members, the increase in output is attributed to new business gains, positive demand trends and investment in technology. Growth, the report added, was reportedly curbed by fierce competition, cost pressures and changes in consumer preference (i.e., switch to online services).
Pranjul Bhandari, Chief India Economist at HSBC, said, “India’s services PMI data showed that the services sector expanded at a slower pace in September. 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. 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.”
The key measures of sector performance tracked by the HSBC India Services PMI survey, continued to point to historically strong rates of expansion. Nevertheless, total new business, international sales and output all rose at the slowest rates since late-2023. Among the main positive outcomes seen in September, it added, were solid job creation, strengthening business confidence and the weakest uptick in selling prices in over two-and-a-half years.
In terms of new business intakes, the survey stated that it expanded sharply at the end of the second fiscal quarter but the pace of growth retreated to a ten-month low. In terms of sectors, finance and insurance led widespread increases in both output and new orders. “One factor that constrained total sales growth was a softer increase in new export orders. 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 report said.
With expectations that demand conditions will remain favourable in the year ahead, businesses were more confident in the outlook for output. This positive business outlook also prompted firms to continue hiring. The solid increase in services employment seen since May was extended to September. Service providers reported the recruitment of full- and part-time workers, with both permanent and temporary contracts being offered.