homeeconomy NewsIndia's service sector activity falls to 6 month low amid inflationary pressures, report

India's service sector activity falls to 6-month low amid inflationary pressures, report

India's service sector activity falls to 6-month low amid inflationary pressures, report
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By Sangam Singh  Oct 6, 2022 12:08:50 PM IST (Updated)

The services sector witnessed an expansion in output for the fourteenth straight month. In Purchasing Managers' Index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction.

Amid inflationary pressures and competitive conditions, the Indian services sector activity fell to a six-month low in September, a monthly survey said. Highlighting the weakest rate of expansion since March, the seasonally adjusted S&P Global India Services PMI Business Activity Index fell to 54.3 in September from 57.2 in August.

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The services sector witnessed an expansion in output for the fourteenth straight month. In Purchasing Managers' Index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction.
"The Indian service sector has overcome many adversities in recent months, with the latest PMI data continuing to show a strong performance despite some loss of growth momentum in September," said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.
"The upturn was reportedly restricted by price pressures, an increasingly competitive environment and unfavourable public policies," the survey said.
Lima also said that the Indian currency depreciated towards the end of the month due to US interest rate hikes present additional challenges to the Indian economy.
"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," Lima said.
On September 30, the RBI's monetary policy committee (MPC) had raised the repo rate by 50 bps to 5.90 percent - the highest since April 2019.
Lima added that an upturn in inflation could damage consumer spending, dampen business confidence and test the resilience of the Indian service sector in the coming months but service providers were strongly upbeat towards growth prospects at least for September.
The survey further noted that weak external demand weighed on overall sales, with international orders declining further in September. "Monthly contractions have been recorded in each month since the onset of COVID-19. The data highlighted a continued revival in business confidence, with sentiment at its highest level in over seven-and-a-half years," the report said.
Citing higher energy, labour and material costs, the service providers signalled a further increase in their operating expenses during September.
On the employment front, though capacity pressures moderated in September, efforts to clear pending workloads and ongoing expansions in sales supported another round of job creation.
Meanwhile, the S&P Global India Composite PMI Output Index slipped from 58.2 in August to 55.1 in September. Private sector sales rose at the weakest pace in six months due to less increase in the manufacturing and services economies.
The S&P Global India Services PMI is compiled from responses to questionnaires sent to around 400 service sector companies.
-With inputs from PTI
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