India Services growth hits 10-month low in September, Reuters PMI shows

By Shaloo Shrivastava

BENGALURU (Reuters) – Growth in India’s dominant services sector remained robust but fell to a 10-month low in September as demand slowed, a business survey showed on Friday.

The final HSBC India Services Purchasing Managers’ Index compiled by S&P Global fell to 57.7 in September from a five-month high of 60.9 in August and was below the preliminary estimate of 58.9.

“The headline index of business activity fell below 60 for the first time in 2024, but we note that at 57.7 it was still well above the long-term average,” noted Prânjul Bhandari, HSBC’s chief economist for India.

For more than three years, the index has remained above the 50 mark separating expansion from contraction.

The new business sub-index – a gauge for overall demand – fell to its lowest level since November, but was still above the historical average. International demand grew at its slowest pace this year.

However, the business outlook for the coming year has improved, prompting firms to continue to add headcount. Hiring rose slightly from August, extending the streak of job creation to more than two years.

Cost inflation has accelerated since August as prices for electricity, food and other materials rose. However, firms passed on the extra costs to customers at the slowest pace since February 2022.

“Margins for service companies were likely to be squeezed further as prices charged rose at a slower pace when input cost inflation intensified,” Bhandari added.

Indian inflation was below the Reserve Bank of India’s (RBI) medium-term target of 4% in July and August. According to a recent Reuters poll, it was forecast to average 4.2%-4.6 each quarter until at least July 2026.

The RBI was widely expected to keep its key repo rate at 6.50% on Wednesday but cut it by 25 basis points in December.

A manufacturing PMI released on Tuesday fell to an eight-month low of 56.5 in August, which, along with a slide in services activity, meant the global composite PMI was the weakest since last November. The composite index fell to 58.3 in September from 60.7.