India’s services sector sank to a four-month low in July from an over 11-year high in June. The S&P Global India Services Purchasing Managers’ Index (PMI) fell to 55.5 in July from 59.2 in June, according to the data released on August due to weaker sales growth and inflationary pressures.
However, the index has been above the 50-mark that separates growth from contraction for a year. Reading in July was higher than the long-term average.
"There were many positives in the latest results. Business activity continued to rise strongly, with a similarly robust uplift in new business as the offering of new services and marketing efforts bore fruit," said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.
"There was, however, a noticeable loss of momentum for the Indian service economy as demand was somewhat curtailed by competitive pressures, elevated inflation and unfavourable weather," De Lima said.
Delayed monsoon in parts of the country saw temperatures soaring in the first half of July. This unfavourable weather hindered growth of the services sector, firms told S&P Global. India has also been grappling with soaring inflation, at a near-decade high, exacerbated by rising commodity prices. A weaker rupee has further bumped up imported inflation.
The Reserve Bank of India (RBI), which began on its tightening cycle in May, is expected to front-load subsequent hikes to contain inflation.
The overall S&P Global India Composite PMI Output Index was strong at 56.6, supported by the factory PMI that rose to its highest since November. However, the composite PMI was at a four-month low and down from 58.2 in June. The manufacturing index was 53.9 in June, the lowest in nine months.