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India’s services sector growth declined in the month of September, as both new business inflows and output rose at the slowest rates since March, amid inflationary pressures and competitive conditions, which in turn dampened job creation. The seasonally adjusted S&P Global India Services PMI Business Activity Index fell from 57.2 in August to 54.3 in September. Further, the S&P Global India Composite PMI Output Index -- which measures both manufacturing and services -- slipped from 58.2 in August to 55.1 in September, pointing to the weakest rate of expansion since March but one that was above its long-run average.

As per the report, weak external demand weighed on overall sales, with international orders declining further in September. Monthly contractions have been recorded in each month since the onset of COVID-19. It also noted that capacity pressures moderated in September, with services companies signalling the slowest increase in backlogs since February. Nevertheless, efforts to clear pending workloads and ongoing expansions in sales supported another round of job creation. However, employment rose at a slower rate than in August.

On the inflation front, service providers signalled a further increase in their operating expenses during September, owing to higher energy, food, labour and material costs. The overall rate of inflation was little-changed from August. Although selling prices once again rose at an above-trend pace, the overall rate of inflation slipped to a six-month low. Meanwhile, marketing efforts and forecasts of sales growth boosted business confidence in September. Services firms were at their most upbeat towards the outlook in over seven-and-a-half years.