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The services sector in India, despite experiencing its slowest expansion in a year due to weakened demand, demonstrated resilience with a notable surge in output, according to a private survey released on Tuesday.
The S&P Global India Services Purchasing Managers‘ Index fell to 56.9 in November from October’s 58.4.
The Services PMI has maintained its position above the critical threshold of 50, indicating a continuous period of 28 months in which it distinguishes between expansion and contraction in activity.
The survey highlighted that businesses maintained a positive outlook for the next 12 months, although confidence somewhat waned due to rising inflation expectations.
“India’s service sector has lost further growth momentum … but we continue to see robust demand for services fuelling new business intakes and output,” noted Pollyanna De Lima, economics associate director at S&P Global.
“The current rates of expansion look very healthy when considering their respective long-run averages and the outlook for business activity remains bright in spite of optimism fading due to rising inflation expectations,” she added.
Services providers in India recorded a sales increase midway through the third fiscal quarter, attributed to new client wins, demand strength, and favorable market conditions. Although the overall rate of growth softened, it remained sharp and above the series trend.
According to the report widespread slowdowns in rates of growth were observed across the service economy, with Finance & Insurance leading the rankings and Real Estate & Business Services coming last. International demand for Indian services improved, but overall growth lost momentum.
On the cost front, there was relief for service providers, as the rate of input price inflation receded to the weakest in eight months. Fewer companies increased their fees, potentially boosting demand as 2023 approaches.
However, services firms became more cautious about hiring, given stable backlog levels and a lack of pressure on operating capacities. While net employment still rose in November, the rate of job creation was marginal and the slowest in seven months.
Operating expenses for services firms increased further, with rising costs in labor, food, material, and transportation. Despite this, the overall rate of inflation softened to an eight-month low.
The pace of net employment expansion was marginal and the slowest since April. Services firms still forecast activity growth in the year ahead, anticipating better demand conditions, and identified marketing initiatives and customer relationship management as opportunities for the future.
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