India's services growth touches 7-month low in October: Here's why
India's services sector experienced its most sluggish growth in seven months during October, as job creation slowed due to a slight dip in demand. Nevertheless, core activities remained robust, and exports consistently increased. The S&P Global's India Services Purchasing Managers' Index (PMI) dropped to 58.4 in October from 61.0 in September. Despite the deceleration, the reading stayed above the 50-point threshold that distinguishes growth from contraction for the 27th consecutive month.
Exports show strength amid slower new business growth
Pollyanna De Lima, Economics Associate Director at S&P Global, pointed out that even with the easing of business activity and new work intakes from September's 13-year peak, India's service economy maintained remarkable growth. Exports were particularly robust in October, as new business gains from Asia, Europe, and the US propelled growth to its second-highest level in the series' nine-year history. However, new business growth slowed to its weakest pace in five months.
Fierce competition and subdued demand impact outlook
The survey emphasized "fierce competition and subdued demand for certain types of services," which appeared to dampen the business outlook for the upcoming year. The future activity sub-index declined to 63.5 from a nine-year high in September, and job creation slowed to a three-month low. Despite this, companies passed on increased input costs to consumers due to rising food, fuel, and personnel expenses, with both input costs and prices charged, growing more rapidly than in the previous month.
Inflation expectations dampen business confidence
De Lima further explained that while survey respondents passed on extra cost burdens to clients because of strong demand, the increase in charges may have contributed to the slowdown in sales growth. Additionally, heightened inflation expectations in October weakened business confidence. This could present risks to India's retail inflation, which eased to a three-month low of 5.02% in September.
