Due to pricing pressures and competitive circumstances, India’s services sector growth reached a seven-month low in October, according to a monthly survey released on Friday. This was due to a slower rise in production and new business.
After reaching a 13-year high of 61 in September, the seasonally adjusted S&P Global India Services PMI Business Activity Index dropped to 58.4 in October, indicating the weakest pace of increase since March.
According to the Purchasing Managers’ Index (PMI), a score of less than 50 indicates contraction while a print over 50 indicates growth.
The poll is made up of answers to questionnaires that were sent to around 400 businesses in the service industry.
“A number of firms succeeded in obtaining fresh contracts; however, a few cited decreased demand for their offerings and competitive circumstances,” said Pollyanna De Lima, Associate Director of Economics at S&P Global Market Intelligence.
Since the series began in September 2014, the October statistics showed the second-fastest increase in foreign orders made with Indian service providers. Members of the survey mentioned profits from customers in the US, Europe, and Asia.
“October was a particularly strong month for exports, as fresh business opportunities from Asia, Europe, and the US drove growth to the second-highest level in the series’ nine-year history,” Lima said.
Regarding expenditures, Indian service providers reported a rise in their outlays for October, attributing it to increased charges for labor, gasoline, and food.
“Even if survey respondents passed these extra costs onto customers, as allowed by the strength of the demand, the increase in fees could have been the catalyst for the slowdown in sales growth. Furthermore, business confidence was undermined in October by an increase in inflation forecasts, said Lima.
In October, the Future Activity Index declined by almost five points, indicating a decline in optimism over the services sector’s future, despite forecasts for inflation growing.
The S&P Global India Composite PMI Output Index, on the other hand, showed the worst pace of increase since March, falling from 61 in September to 58.4 in October.
“The upturn lost strength in October amid slower increases in manufacturing production and services activity, even though India continued to post substantial growth of aggregate business activity,” the poll said.
October saw a significant increase in the prices of Indian products and services, extending the current inflationary trend to almost three years.