India Nov services growth softens but still solid

By Shaloo Shrivastava

BENGALURU (Reuters) – India’s dominant services sector stayed strong in November but expanded at its slowest pace in a year as demand softened despite cooling inflationary pressures, a private survey showed.

The S&P Global India Services Purchasing Managers’ Index fell to 56.9 in November from October’s 58.4, below all expectations in a Reuters poll which predicted a more modest dip to 58.0.

That marked the slowest pace of expansion since November last year, but the index remained firm and has been above the 50-mark that separates growth from contraction since August 2021.

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

The Indian economy grew 7.6% in the July-September quarter, supported by government spending and manufacturing. India remained the fastest growing major economy and outstripped the Reuters poll expectation for a 6.8% expansion.

However, the PMI’s new business sub-index – a key gauge of demand – fell for a second month and was its lowest in a year in November. An index measuring international demand fell to a five-month low.

“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.”

Overall business confidence slipped to a four-month low in November despite upbeat projections for output. The future activity sub-index was well below September’s nine-year high.

That led firms to increase headcount at a muted pace, with hiring slowing to a seven-month low.

Operating costs and prices charged to customers increased but the pace for both was the weakest since March.

Retail inflation in India eased to 4.87% – a four-month low in October. It is now close to the mid-point of the Reserve Bank of India’s (RBI) target of 2-6% but economists do not expect the RBI to cut interest rates before the third quarter next year.

A manufacturing PMI rose to 56.0 in November but slowing services activity dragged down the overall S&P Global India Composite PMI Output Index to 57.4 – the lowest since November last year.

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