India's services sector
activity continued to expand in September, supported by favourable underlying
demand amid the easing of COVID-19 restrictions, but lost some momentum from
August's 18-month high level, a monthly survey said on Tuesday.
The seasonally
adjusted India Services Business Activity Index fell from 56.7 in August to
55.2 in September, but remained well above its long-run average.
"Despite easing from
August, the rate of expansion was marked and the second-fastest since February
2020," the survey said.
Buoyed by
signs of improvements in underlying demand, Indian service providers took on
additional staff during September.
The increase in employment
ended a nine month sequence of job shedding, but was marginal overall as some
panellists indicated having sufficient workforces to deal with their workloads.
For the second straight
month, the services sector witnessed an expansion in output.
In Purchasing Managers'
Index (PMI) parlance, a print above 50 means expansion, while a score below 50
denotes contraction.
"Indian companies
continued to benefit from a recovery in demand as the pandemic receded further
and restrictions were lifted.
"The improved market
environment meant that firms managed to secure new work and increase business
activity during September," said Pollyanna De Lima, Economics associate
director at IHS Markit.
However, despite the
sustained recovery of the sector, business confidence weakened in September.
"While forecasts of
better demand in the year ahead supported business confidence regarding output,
growth looks set to be constrained by rising inflation expectations.
"We saw a substantial
decline in positive sentiment among service providers due to this factor,
despite input cost inflation retreating in September," Lima said.
Moreover, travel
restrictions continued to weigh on international demand for Indian services.
New export business contracted for the nineteenth month in a row, the survey
said.
Business Activity in
India's private sector rose further in September, as both manufacturing and
services output continued to expand.
The Composite PMI Output
Index -- which measures combined services and manufacturing output -- was
at 55.3 in September, little-changed from 55.4 in August.
On the prices front, amid
reports of higher fuel, material, retail and transportation prices, average
cost burdens faced by Indian service providers rose further during September.
The overall rate of
inflation was "solid", but softened to an eight-month low.
Economists believe the
Reserve Bank of India is expected to continue with the accommodative policy
stance in its October 6-8 monetary policy discussions.
On the macro-economic
front, subdued prices of food items like vegetables pulled down retail
inflation for the third month in a row to 5.3 per cent in August, within the
RBI's comfort zone.
Retail inflation, which
rose sharply to 6.3 per cent in May from 4.23 per cent in April, has been on a
downward trajectory since then.
It was 6.26 per cent in
June and 5.59 per cent in July this year.