Services sector growth loses pace, hits 6-month low in September

India’s services sector growth slowed to a six month low in September, but remained in expansionary mode, a private survey showed Thursday.

The S&P Global India Services Purchasing Managers’ Index dropped to 54.3 from August’s robust 57.2 level. A reading above 50 on the index indicates expansion in activity.

“The upturn was reportedly restricted by price pressures, an increasingly competitive environment and unfavourable public policies,” S&P Global said. September marked the 14th straight month of growth in services sector activity.


While there was “some loss of growth momentum” in September, the declining rupee and higher inflation pose threats in the coming months, cautioned Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

De Lima said that the steep depreciation of the rupee seen towards the end of the month due to interest rate hikes in the US presents additional challenges to the Indian economy. She pointed out that currency instability poses renewed inflation worries as imported items become more costly, and “undoubtedly” means that the RBI will continue hiking interest rates to protect the rupee and contain price pressures.

“The upturn in inflation could damage consumer spending, dampen business confidence and test the resilience of the Indian service sector in the coming months but, at least for September, service providers were strongly upbeat towards growth prospects,” De Lima added.

The aggregate rate of input cost inflation eased to a 22-month low in September due to broad-based slowdowns in manufacturing and services, while selling price hikes were the “weakest in six months”, S&P Global said.

There was continued revival in business confidence, with sentiment at its highest level in over seven-and-a-half years in September.

“The signal from today’s PMI data is essentially one of consolidation, which is also visible across a host of other macro variables, including tax collections, fuel consumption, and mobility data such as railways and aviation traffic,” Barclays said in a note.

The overall resiliency in services PMI should keep growth broadly on track to hit 7% for FY 2022-23, said Rahul Bajoria, chief India economist, Barclays.

A sister survey released Monday showed moderation in manufacturing with the S&P Global India Manufacturing Purchasing Managers’ Index falling to 55.1 in September from 56.2 in August.