India's service sector PMI hits 12-month low amidst slower growth

India's services sector witnessed a dip in growth, reaching a one-year low in November due to reduced order expansion and output, according to a monthly survey released on Tuesday.

The S&P Global India Services Business Activity Index, which measures the performance of the services sector, dropped from 58.4 in October to 56.9 in November, marking a one-year low. Despite this decline, the growth rate remained stronger than its long-term average. In PMI terminology, a score above 50 indicates expansion, while below 50 signifies contraction.

Based on responses from approximately 400 service sector companies, the survey highlighted a slowdown in new work intakes and output, impacting the sector's overall growth. Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, noted that although growth momentum has diminished, there's robust demand for services propelling new business intake and output.

The survey also revealed a decline in both input cost and output charge inflation to eight-month lows. Lima pointed out that fewer companies increased their fees, potentially stimulating demand in the closing months of 2023.

Hiring restrains

Regarding employment, services companies displayed restrained hiring despite stable business levels. Lima highlighted that while net employment increased marginally in November, the rate of job creation was the slowest in seven months due to cautious hiring amidst stable backlog levels.

Looking ahead, businesses remained optimistic about activity in the next 12 months, albeit with some fading confidence due to rising inflation expectations. The S&P Global India Composite PMI Output Index, encompassing both manufacturing and services, declined to 57.4 in November, marking the weakest private sector activity growth in a year.

The survey noted that manufacturers outperformed service providers, experiencing quicker growth, while services witnessed the slowest upturn in a year. Factory orders rose notably, contrasting with cooled demand for services, resulting in an overall weaker sales rate since November 2022.

In light of this economic scenario, the Reserve Bank of India is expected to maintain the current short-term interest rate in its upcoming monetary policy review. RBI Governor Shaktikanta Das will preside over the Monetary Policy Committee's deliberations starting December 6, with the decision announcement scheduled for December 8.

Also Watch: November manufacturing PMI rises to 56 as inflationary pressure retreat