India’s Services Growth Reaches 10-Month Low in September, PMI Reports

By Shaloo Shrivastava

BENGALURU – Growth in India’s leading services sector remained strong but declined to a 10-month low in September due to a slowdown in demand, according to a business survey published on Friday.

The final India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, decreased to 57.7 in September, down from a five-month high of 60.9 in August, and fell short of a preliminary estimate of 58.9.

Pranjul Bhandari, chief India economist at HSBC, commented, "The headline business activity index fell below 60 for the first time in 2024, but at 57.7, it remains significantly above the long-term average."

For over three years, the index has consistently stayed above the 50 mark, which indicates expansion rather than contraction.

The new business sub-index, which reflects overall demand, dropped to its lowest level since November, yet it remained above its historical average. Growth in international demand also slowed to its lowest rate this year.

Despite this, the business outlook for the upcoming year improved, leading companies to continue increasing their workforce. Hiring saw a slight uptick from August, extending job creation efforts to more than two years.

Cost inflation intensified compared to August, driven by rising prices for electricity, food, and other materials. However, companies passed on these increased costs to clients at the slowest rate since February 2022.

"Margins for services companies have likely tightened further, as the prices they charge rose at a slower rate amid heightened input cost inflation," Bhandari added.

Indian inflation remained below the Reserve Bank of India’s (RBI) medium-term target of 4% in July and August. A recent poll indicated an average inflation prediction of 4.2%-4.6% in each quarter through at least July 2026.

The RBI was anticipated to maintain its key repo rate at 6.50% in the upcoming meeting but is expected to reduce it by 25 basis points in December.

A manufacturing PMI report released earlier showed a drop to an eight-month low of 56.5 in August. This decline in both manufacturing and services activities resulted in an overall Composite PMI that reached its weakest level since last November, falling to 58.3 in September from 60.7.