Services activity hits six month low in September

"The Indian service sector has overcome many adversities in recent months, with the latest PMI data continuing to show a strong performance despite some loss of growth momentum in September.," noted Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.

“September also saw a broad stabilisation of input cost inflation and the slowest upturn in prices charged for the provision of services since March. However, the steep depreciation of the rupee seen towards the end of the month due to interest rate hikes in the US present additional challenges to the Indian economy.”

Meanwhile, the composite PMI declined to 55.1 in September from 58.2 in August, pointing to the weakest expansion since March.

Data released on October 3 had showed the manufacturing PMI had cooled to 55.1 last month from 56.2 in August.

In September, service firms linked higher output to greater bookings, events and client bases.

However, the upturn was reportedly restricted by price pressures, an increasingly competitive environment and unfavourable public policies, S&P Global said.

“New orders displayed a similar pattern to business activity, rising for the fourteenth month in a row but at the slowest pace since March. Softer increases in output and new business were seen in each of the four broad areas of the service economy,” it added.

Meanwhile, service providers signalled a further increase in their operating expenses in September, because of higher energy, food, labour and material costs.

India's key inflation rate, as measured by the Consumer Price Index (CPI), returned to 7 percent in August from July’s five-month low of 6.71 percent. The Reserve Bank of India is now just one month away from failure, with CPI inflation having been outside the central bank's 2-6 percent tolerance range for all of 2022.

The RBI is deemed to have failed if CPI inflation is outside the 2-6 percent range for three consecutive quarters. It averaged 6.3 percent in January-March, 7.3 percent in April-June, and will exceed 6 percent again in July-September.

The central bank has raised interest rates sharply since early May in a bid to curb inflation. It is expected to tighten policy again when its rate-setting panel meets in December.