Key Points

Despite the decline, the index remained well above the neutral mark of 50.0, indicating another month of strong expansion in business activity.

The HSBC report stated that at 60.9 in September, the seasonally adjusted HSBC India Services PMI Business Activity Index signalled a substantial upturn in output, although at a slower pace than in August.

The latest figure suggested a loss of growth momentum, reflecting some moderation in demand and new business gains.

Pranjul Bhandari, Chief India Economist at HSBC, said: "Business activity in India's services sector eased in September from the recent-high August level. Most trackers moderated but nothing in the survey suggested there is a big loss in growth momentum in services. Instead, the Future Activity Index rose to its highest level since March, indicating strengthening optimism services companies about business prospects."

The report also mentioned that operating conditions across India's service economy remained favourable during the month, supported by healthy demand trends.

This pointed out further growth in total new orders, exports, employment, and overall business activity. However, the report noted that the rates of expansion in all four categories eased compared to August.

Encouragingly, the report highlighted that a softer increase in expenses helped limit the pace of charge inflation in September.

Moreover, business confidence towards the year-ahead outlook for output strengthened, suggesting optimism among service providers.

Anecdotal evidence cited in the report indicated that demand buoyancy, new business gains, technology investments, and favourable public policies contributed to the rise in output. At the same time, barriers to growth mentioned by panel members included competitive conditions and cost-control measures.

The survey further pointed out that new order intakes rose sharply, though at a slower pace than in August. Underlying data showed that part of this slowdown was due to weaker improvements in international demand for Indian services.

External sales increased during September but at the least extent since March. Companies attributed the softer growth in export orders to the availability of similar services at lower prices in other markets.

Indian services companies also reported a further increase in their expenses at the end of the second fiscal quarter, the report added.

- ANI