India's Services Growth Dips, Pulls Private Sector Activity to a Yearly Low in November

By IndraStra Global News Team

The pace of expansion in India's service sector took a substantial hit in November, marking a one-year low, according to the latest S&P Global India Services Business Activity Index data. The index, adjusted for seasonal fluctuations, declined from 58.4 in October to 56.9 in November. This deceleration was primarily attributed to a notable slowdown in the growth rates of both new orders and output across various sectors.
The slip in the services sector, combined with the earlier released Manufacturing Purchasing Managers' Index (PMI) for November, painted a picture of the country's weakest rise in private sector activity over the past year. The S&P Global India Composite PMI ® Output Index fell from 58.4 in October to 57.4 in November.
Despite the overall slowdown, there was a glimmer of positivity as services firms remained optimistic about their future prospects, although concerns surrounding rising inflation impacted this sentiment. Additionally, while there was still expansion in net employment during November, the growth rate was at its lowest since April of the same year. This cautious approach towards hiring was triggered by stable outstanding business volumes among services firms.
The survey also highlighted an increase in operating expenses across various sectors attributed to rising labor, food, materials, and transportation costs since October. However, the overall rise in costs was below the long-term average. Consumer Services firms particularly experienced a surge in input cost inflation.
Conversely, although prices were raised at a pace above the long-term trend, it marked the slowest increase in eight months. The finance and insurance sectors notably witnessed the strongest upturn in selling prices.
Pollyanna De Lima, the economics associate director at S&P Global Market Intelligence, expressed observations on the declining growth momentum in India's service sector. She remarked, "India’s service sector has lost further growth momentum midway through the third fiscal quarter, but we continue to see robust demand for services fuelling new business intakes and output."
With some moderation in cost pressures, fewer companies increased their fees in November, potentially aiding a demand upswing as the year concludes, noted Ms. De Lima. She further emphasized that services firms approached hiring more cautiously due to stable backlog levels.
While factory orders substantially increased, service demand experienced a mild cooling effect. Both input costs and output charges increased at the slowest rates since March, with services firms encountering more pronounced inflation in costs. Overall business optimism, although remaining upbeat, slightly waned to a six-month low, according to S&P Global Market Intelligence.

EDITORIAL NOTE: The November data reflects a mixed scenario for India's service sector, highlighting challenges amid some positive indicators. Experts will be closely observing the coming months to gauge how factors like inflation, demand, and growth prospects will shape the future trajectory of the country's economic landscape.

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