The seasonally adjusted S&P Global India Services PMI Business Activity Index declined to 58.4 in October compared with 61 in the previous month, according to a private survey released Friday.
A value of over 50 denotes expansion.
“Rates of expansion softened, however, 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.The survey, which covers 400 service firms, reported rising input costs owing to a surge in food, fuel and staff costs.”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.
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.
Silver lining
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 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.
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.
