India's services PMI falls to one-year low of 56.9 in November

The services Purchasing Managers’ Index stood at 58.4 in October.

India's services sector activity continued to expand in November, although the S&P Global Purchasing Managers' Index (PMI) fell to a one-year low of 56.9, data released on December 5 showed.

While the gauge of services sector activity fell from October's 58.4, it was still above the key level of 50, which separates expansion in activity from contraction, for the 28th month in a row.

The composite PMI also fell to a one-year low of 57.4 from 58.4 in October, although it could have a steeper decline had the manufacturing index not increased last month, with data released on December 1 showing that the PMI rose to 56.0 from October's eight-month low of 55.5.

"India's service sector has lost further growth momentum midway through the third fiscal quarter, but we continue to see robust demand for services fuelling new business intakes and output," noted Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

"The current rates of expansion look very healthy when considering their respective long-run averages and the outlook for business activity remains bright in spite of optimism fading due to rising inflation expectations," De Lima said.

According to S&P Global's survey data, output of the Indian services sector increased sharply in November at a rate "considerably stronger" than its long-run average but continued at the weakest pace since November 2022, thanks to a rise in sales on the back of new client wins, demand strength, and favourable market conditions. However, there was a "widespread slowdowns" in the increase in new orders, S&P Global noted.

Similarly, while overseas demand for Indian services improved, the rate of increase was the slowest since June. The net result on jobs was a gain, but the rate of increase being the weakest since April.

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On the price front, service providers saw their input cost inflation fall to an eight-month low in November, which allowed their prices to change. However, consumer services firms recorded the highest rate of input cost inflation, while the highest increase in prices charged was in the finance and insurance segment.

"Qualitative data from the future output question indicated that rising inflation expectations somewhat curbed optimism in November. Services firms still forecast activity growth in the year-ahead, however, amid hopes of better demand conditions," S&P Global said.

The latest PMI data comes a day before the Reserve Bank of India's Monetary Policy Committee begins its three-day meeting to decide on the interest rates. While the rate-setting panel's decision is considered a given - it is seen maintaining the policy repo rate at 6.5 percent for the fifth meeting in a row on December 8 - economists see a hike in the GDP growth forecast for the year by 20-30 basis points from 6.5 percent.