India's Services Sector Growth Hits Four-Month High in October, PMI Rises to 55.8

New Delhi: India's services sector recorded its strongest expansion in four months in October, supported by robust domestic demand and an increase in business activity and new orders, according to the latest HSBC Purchasing Managers' Index (PMI) data.

The Services PMI rose to 55.8 in October from 55.2 in September, marking its highest reading in four months. A reading above 50 indicates expansion, while a score below that level signals contraction.

The improvement in the services sector also lifted the overall private-sector performance. India's Composite PMI, which combines activity in manufacturing and services, increased to 56.2 in October from 55.9 in the previous month, indicating the fastest growth in aggregate business output in four months.

However, export demand showed signs of moderation. Pranjul Bhandari, Chief India Economist at HSBC, said that while overall demand remained relatively strong, the growth in new export orders recorded its slowest pace since February 2023.

She noted that business conditions in the services sector improved during October, while input and output price pressures eased compared with the previous month.

The survey also revealed that input cost inflation declined to its lowest level since August 2020. Meanwhile, the rate at which service providers increased prices charged to customers slowed to its weakest level since June, offering some relief from inflationary pressures.

All four broad segments of the services economy covered by the survey registered faster growth in output and new business during October. Finance and Insurance emerged as the strongest-performing segment in both categories, while Real Estate and Business Services recorded the slowest expansion.

Domestic demand remained the primary driver of sales growth, highlighting the continued importance of the Indian market for service-sector businesses.

Business confidence also remained positive, with service providers expecting output to increase over the next 12 months.

Meanwhile, companies continued to reduce their accumulated backlogs of unfinished work. Outstanding business volumes declined for the third time in the past four months, although the reduction was moderate. The easing of backlogs also coincided with slower employment growth in the services sector during October.

The latest PMI findings further indicated that inflationary pressures remained less pronounced in services than in the manufacturing industry, suggesting comparatively moderate cost pressures for service providers.

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