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India’s services sector activity fell to six-month low in September, survey shows

India’s services sector activity fell to a six-month low in September due to inflationary pressures and competitive conditions, the S&P Global India Services Purchasing Managers’ Index released on Thursday showed.

The index fell to 54.3 in September from 57.2 in August, the weakest rate of expansion since March. A score above 50 indicates expansion while a score below 50 indicates contraction.

The Purchasing Managers Index is an indicator of business activity in the manufacturing and service sectors. S&P Global said it considers new orders, production, employment, supplier lead times and purchase inventory to calculate the index.

The country’s service sector, however, reported an expansion in output for the 14th consecutive month, according to the report.

“India’s services sector has weathered many adversities in recent months, with the latest PMI data continuing to show strong performance despite some loss of growth momentum in September,” said Pollyanna De Lima, associate director of economics. at S&P Global Market Intelligence.

De Lima said Indian companies continued to hire additional workers to meet growing demand and there was also a broad stabilization in input cost inflation.

“However, the sharp depreciation of the rupee seen towards the end of the month due to rising interest rates in the United States presents additional challenges for the Indian economy,” she said.

The associate director said imported items will become more expensive due to currency instability, due to which the Reserve Bank of India is expected to continue raising interest rates to protect the rupee and contain the pressure on the price.

On September 30, the Reserve Bank of India raised the repo rate by 50 basis points to 5.9% to fight inflation. The repo rate is the interest rate at which the central bank lends money to commercial banks.

This is the fourth repo rate hike since May.

Monday’s release of the S&P Global India Manufacturing Purchasing Managers’ Index showed Indian factory growth in September was the slowest since June, but output continued to rise.

The manufacturing PMI fell to 55.1 in September from 56.2 in August.