India’s services activity declined to a 10-month low of 57.7 in September from 60.9 in the previous month as fierce competition, waning export demand and cost pressures weighed on activity, according to a private sector survey released on October 4.
The HSBC India Services Business Activity Index dipped below 60 for the first time in nine months but stayed above the long-run average. A reading above 50 denotes expansion.
"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," said Pranjul Bhandari, chief India economist, HSBC.
The 400 service sector firms noted changing consumer preferences in terms of a shift to online services as another reason for dip in services acitvity.
"Looking at more granular data, Finance & Insurance led widespread increases in both output and new orders at the
sub-sector level," the HSBC report noted.
Despite the decline, there was an improvment in optimism with businesses more confident in year ahead outlook. This was also reflected in strong employment gains, which continued from trend witnessed in May.
The fall corresponds with the decline in factory activity during the month. The manufacturing activity index slipped to an eight-month low of 56.5 on tepid exports and a slowdown in output growth, data released earlier this week showed.
Similar to manufacturing firms, margins in services sector also got squeezed as input inflation outpaced charge inflation.
Other high-frequency data released over the week, too, have seen a decline. GST collections dipped to Rs 1.73 lakh crore from Rs 1.75 lakh crore in the previous month and coal output also slowed down.
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