The services sector, which accounts for the bulk of the Indian economy, contracted last month, according to the HSBC Purchasing Managers’ Index (PMI) for services. The headline number fell to 49.8.
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A number below 50 indicates contraction. The composite PMI (manufacturing + services), at 50.2 for September, barely kept its head above water. The employment sub-index for services has been below 50 for the last three months, while employment in manufacturing has been contracting for two months, according to the PMI data.
But the slowdown in growth is yet to have an impact on prices. The “prices charged” sub-index of the services PMI came in at 57.5 in September, still firmly in the expansionary territory. That shows companies still have pricing power. The Reserve Bank of India is now faced with the dilemma that while growth is slowing sharply, inflation is not.
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