The HSBC India Services Purchasing Managers Index, compiled by S&P Global, fell to 57.7 from 60.9 in August. It was 61.8 at the start of the year.
A reading above 50 signifies expansion while that below indicates contraction.
At 57.7, it is still much above the long-term average, said Pranjul Bhandari, chief India economist at HSBC. “The new business index followed a similar trajectory as the headline figure, indicating the possibility of softer output growth in the coming months. Services companies’ margins have likely been squeezed further, as prices charged rose at a slower pace when input cost inflation intensified.”
The average in the second quarter of the current financial year at 59.6 was lower than 60.5 recorded in the first quarter.
Change in consumer preferences to online services and cost pressures led to a decline in activity, the survey mentioned.However, there were employment gains. “A long period of robust new business growth has led to strong labour demand,” said Bhandari.Sector-wise, finance & insurance recorded an increase in both output and new orders.
The drop in service activity is in correspondence to the dip in manufacturing activity which was at an eight-month low in September because of softer growth in exports and output.
With both factory and services production growing at slower rates, HSBC India Composite Output Index fell from 60.7 in August to 58.3. “The rate of increase softened to the slowest since November 2023,” the survey noted.
This was due to softer increase in new business which was at a ten-month low. Growth in international sales was also the weakest in 2024.
Despite this, private sector employment was up significantly and business confidence strengthened since August, according to the survey. Composite PMI is a weighted average of comparable manufacturing and services PMI indices.
Services exports increased by 11.7% to $119.5 billion in 2024-25 (as of July) compared to a similar period a year ago.