BENGALURU (Reuters) -India's dominant services sector saw its expansion falter to a five-month low in October, as competitive pressures and heavy rains dampened the robust pace of growth seen in recent months, a survey showed on Thursday.
While new business - a key gauge of demand - continued to rise sharply, the slowdown highlights emerging headwinds for Asia's third-largest economy, which is expected to grow 6.7% this fiscal year from 6.5% last year, even as inflationary pressures showed marked
signs of easing.
HSBC's India Services Purchasing Managers' Index (PMI), compiled by S&P Global, fell to 58.9 last month from 60.9 in September. The final reading, representing the slowest expansion since May, largely matched the preliminary estimate of 58.8.
The index remained comfortably above the 50-mark separating growth from contraction for the 51st consecutive month and stayed above its long-run average, indicating underlying conditions remain robust despite the deceleration.
A slowdown in demand drove the moderation. The new business sub-index, though substantial, slipped to a five-month low. Survey participants attributed this restricted growth to heightened competition, as well as floods and landslides in parts of the country.
International demand also softened with new export business expanding at the weakest pace in seven months.
That meant business optimism took a knock, with confidence about the year ahead, though still strong, slipping to a three-month low. Meanwhile, firms' appetite to hire remained muted, with job creation running at the joint-softest pace in 18 months.
However, input costs rose at the slowest rate since August 2024, with firms noting the reduction in a goods and services tax helped curb price pressures. As a result, companies passed this on to customers, with prices charged for services increasing at the most sluggish pace in seven months.
That meant India's retail inflation could ease further after already cooling to an over-eight-year low of 1.54% in September, giving room for the Reserve Bank of India to cut interest rates next month.
The HSBC Composite PMI index, which combines both services and manufacturing, eased to a five-month low of 60.4 in October from 61.0 in September. The survey highlighted the slowdown was primarily led by services as manufacturers registered a faster expansion in both output and new orders.
(Reporting by Anant Chandak; Editing by Kim Coghill)
