NEW DELHI: Services activity grew at the slowest pace in seven months in October as fierce competition and subdued demand due to an uptick in price pressures weighed down on expansion and dented business sentiment.
The seasonally adjusted S&P Global India Services PMI Business Activity Index declined to 58.4 in October from 61 in September, a private survey released Friday showed. A value of over 50 denotes expansion.
“Rates of expansion softened, reportedly due to competitive conditions and price pressures. There were faster increases in input costs and output charges during October, with rates of inflation outpacing their respective long-run averages,” S&P Global Market Intelligence stated in its release.
The future activity index declined five points in October, reflecting a loss of confidence as firms reported a rise in inflation expectations.
“A pick-up in inflation expectations dampened overall business sentiment,” said Pollyanna De Lima, Economics Associate Director, S&P Global Market Intelligence.
“Inflationary forces in the Indian service sector intensified, primarily as a result of surging food, fuel and staff costs. Although survey participants passed these additional cost burdens on to clients, permitted by demand strength, the rise in charges could have been the trigger of the deceleration in sales growth,” De Lima said, about the findings of the survey that covered 400 service firms.
Indian crude basket averaged $90.08 in October compared with $83.76 at the start of the fiscal.
The overall inflation rate quickened from September and was trending above its long-run average.
“The rate of charge inflation was marked, above its long-run average and the joint-strongest in close to six-and-a-half years,” the release highlighted.
While the rates of expansion slowed down for new work intakes, export growth continued to remain robust. “Exports was an area of particular strength in October, with new business gains from Asia, Europe and the US boosting growth to its second-highest in the series over (its) nine-year history,” De Lima said.
The expansion supported job creation, albeit at a slower pace than in previous months.
Data released earlier this week showed manufacturing activity expansion also slowing to an 8-month low.
“Both the manufacturing and services PMIs for September indicate optimistic sentiment on economic activity, but the pace is slowing,” said Rahul Bajoria, MD & head of EM Asia (ex-China) Economics, Barclays.
Reserve Bank of India’s monetary policy committee expects economic growth to settle at 6.5% in Q2FY24 and 6% in Q3FY24, compared with the 7.8% growth in the first quarter.
Source: The Economic Times
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