India's services activity falls to a one-year low yet prospects remain strong: PMI data

India's services sector may have expanded at the slowest rate in a year on softening demand but showed resilience as output across the sector saw a sharp increase, a private survey showed on Tuesday.

The S&P Global India Services Purchasing Managers' Index fell to 56.9 in November from October's 58.4. A Reuters poll pegged a dip to 58. Despite the rate of expansion being the slowest since November 2022, the index has now remained about the 50-mark, which separates growth from contraction, since August 2021.

The services sector accounts for over 50% of India's gross domestic product (GDP).


"India's service sector has lost further growth momentum ... but we continue to see robust demand for services fuelling new business intakes and output," noted Pollyanna De Lima, economics associate director at S&P Global.

"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."

India's manufacturing PMI rose to 56 in November. The fall in the services sector expansion rate dragged the composite PMI reading to 57.4, a one-year low.

Data shows that inflation was more pronounced at companies engaged in services activities, than at their manufacturing counterparts.

"Despite seeing price pressures waning in November, private sector companies signalled rising inflation expectations through qualitative data for growth prospects," the press release read.

Optimism in India's private sector remained strongly upbeat, data shows, but faded to a six-month low.

Despite optimistic output forecasts, the overall business confidence dipped to its lowest point in four months in November. The sub-index for future activities significantly decreased from the nine-year high seen in September.

Companies expanded their workforce at a muted rate, with hiring reaching a seven-month low. Additionally, there was a moderate increase in operating costs and customer prices, marking the slowest pace since March.