BENGALURU, Oct 6 (Reuters) – The growth pace of India’s services sector experienced a slight decline in September, primarily attributed to reduced demand from international markets; however, the overall performance remained robust, with a notable increase in optimism among businesses, according to a recent survey.
The HSBC India Services Purchasing Managers’ Index (PMI), which is put together by S&P Global, recorded a drop to 60.9 in September from an impressive 15-year peak of 62.9 in August, falling short of an initial estimate of 61.6.
A reading above 50.0 on this index signals growth in business activity.
Although the momentum has slowed from the remarkable growth seen in August, business activities have continued to show strong expansion, marking the second-best performance in the last 13 months.
Companies attributed this sustained growth to ongoing demand and investments in technology, although several faced challenges posed by increased competition and stringent cost management strategies.
Despite a decline from August’s levels, the new business sub-index remained strong, reflecting the second-fastest growth since August 2024.
However, an index measuring the demand for Indian services overseas showed a significant decrease, with export orders increasing at the slowest rate since March. Companies indicated that price competition from international providers was a major factor limiting growth in foreign sales.
Nonetheless, confidence among businesses regarding the upcoming year rose to a six-month high. Companies cited various factors for this optimism, including planned advertising initiatives, expected improvements in efficiency, competitive pricing approaches, and the anticipation of tax reductions.
On the employment front, hiring growth remained modest in September, with less than 5% of the surveyed companies indicating new recruitment.
Both the pressures of input costs and the prices charged by service providers showed signs of easing from August levels. Firms passed on additional costs to consumers at the slowest rate observed since March.
In August, India’s inflation rate rose to 2.07% from July’s 1.61%, effectively ending a nine-month streak of decreasing rates. Despite this uptick, the inflation figure remains well within the Reserve Bank of India’s target range of 2-6%. The RBI maintained its key repo rate at 5.50% during its meeting on October 1.
The HSBC India Composite PMI Output Index, which combines both manufacturing and services sectors, decreased to 61.0 in September from 63.2, marking its lowest reading in three months, yet it still signifies strong overall growth.
The composite data indicated a softer growth trajectory across both sectors, revealing a slowdown in the increase of new orders and overall output for September.
