New Delhi: India's service sector expanded at its slowest pace in more than two years during January, owing to lower demand and a softer increase in sales and output, a private survey released on Wednesday said.
The seasonally adjusted HSBC India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, fell to 56.5 in January, its lowest since November 2022, but comfortably above the 50-point threshold that distinguishes expansion from contraction. The index stood at 59.3 in December, 58.4 in November, 58.5 in October, and 57.7 in September.
According to the survey, a few firms suggested that activity levels at their units were constrained by a fall in customer numbers. However, service providers in India were confident of a rise in business activity in the coming 12 months, it added.
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"Qualitative data showed that advertising, efforts to price competitively and new client enquiries were some of the reasons listed for upbeat forecasts," the survey said. "The level of positive sentiment did fall to a three-month low but was broadly aligned with the series trend," it added.
According to Pranjul Bhandari, chief India economist at HSBC, India’s services sector lost growth momentum in January. "The business activity and new business PMI indices eased to their lowest levels since November 2022 and November 2023, respectively," Bhandari said.
"New export business partly countered the downtrend and continued to rebound from a dip in late 2024, in line with official data which showed India’s services exports shining in December and capturing a larger share of global trade," she added.
India’s services sector—a pillar of its economy—accounts for more than half of the country’s gross domestic product (GDP). The economy expanded by 8.2% in FY24, buoyed by 7.8% growth in the January-March 2024 quarter and surpassing the Reserve Bank of India’s (RBI’s) 7% projection for the fiscal year.
However, momentum slowed the following year. GDP growth eased to 6.7% in the first quarter of FY25, marking its slowest pace in five quarters, before further decelerating to 5.4% in the second quarter—the slowest in nearly two years—amid sluggish manufacturing, subdued urban consumption, and lacklustre corporate earnings.
India’s finance ministry recently said it expects the economy to grow at 6.4% in FY25, while the RBI estimates 6.6% growth aided by rural consumption, government investment, and strong services exports.
Meanwhile, India’s manufacturing growth, which moderated in December, rose to a six-month high in January on the back of rising new export orders, a survey released on Monday said. The HSBC India Manufacturing Purchasing Managers Index (PMI), compiled by S&P Global, came in at 57.7 in January, up from 56.4 in December and 56.5 in November. It was 57.5 in October and 56.5 in September. The January PMI number was based on responses from 400 manufacturers.
The HSBC India Composite Output Index, a gauge of the combined services and manufacturing output, fell from 59.2 in December to a 14-month low of 57.7. in January.
"Aggregate sales increased at the slowest pace since last September, albeit one that was sharp. A pick-up in growth of factory orders contrasted with the weakest rise in services sales since November 2023," the survey said.
"For the third straight month, services companies noted stronger cost pressures than goods producers. Across the private sector, the latest rise in input prices was the least pronounced since October 2024 and below its long-run average," it added.
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