The services sector growth in India fell to a one-year low in November on softer expansions in new work intakes and output, despite receding price pressures, a monthly survey said on Tuesday.
The seasonally adjusted S&P Global India Services Business Activity Index fell from 58.4 in October to a one-year low of 56.9 in November. Despite witnessing a month-on-month decline, the rate of expansion was stronger than its long-run average.
In Purchasing Managers’ Index (PMI) parlance, a print above 50 means expansion while a score below 50 denotes contraction.
The survey is compiled from responses to questionnaires sent to a panel of around 400 service sector companies.
“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.
“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,” said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.
On the prices front, rates of both input cost and output charge inflation slipped to eight-month lows.
“Fewer companies hiked their own fees as a result, an aspect that might provide a further boost to demand as 2023 draws to a close,” Lima said.
On the employment front, services companies curbed recruitment to some extent amid broadly stable levels of outstanding business among services companies.
“… Given the lack of pressure on operating capacities signalled by stable backlog levels, services firms became more cautious when it comes to hiring. Net employment still rose in November, but the rate of job creation was marginal and the slowest in seven months,” Lima said.
Going ahead, businesses maintained a positive outlook for activity in the coming 12 months, although confidence somewhat faded due to rising inflation expectations.
Meanwhile, the S&P Global India Composite PMI Output Index fell from 58.4 in October to 57.4 in November, signalling the weakest rise in private sector activity across India for a year.
The Composite PMI indices are weighted averages of comparable manufacturing and services PMI indices. Weights reflect the relative size of the manufacturing and service sectors according to official GDP data.
“Manufacturers outperformed service providers, and noted a quicker rate of growth. Services saw the slowest upturn in one year,” the survey said.
Similarly, factory orders rose to a greater extent and demand for services somewhat cooled. At the composite level, sales increased at the weakest rate since November 2022, as per the survey.
Meanwhile, the Reserve Bank is likely to maintain the status quo on the short-term interest rate in its monetary policy review later this week.
RBI Governor Shaktikanta Das-headed Monetary Policy Committee (MPC) is scheduled to begin its three-day deliberations on December 6.
Das would unveil the decision of the six-member MPC on December 8.
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