India's services sector maintained a healthy growth in September, supported by strong demand, rising new orders, and favorable business conditions, even as it softened compared to August.

The HSBC India Services PMI Business Activity Index stood at 60.9 in September, well above the neutral 50.0, but slightly below August's 62.9, indicating a modest easing in momentum.

Exports continued to rise but at the slowest pace since March, as competition from lower-priced international services weighed on order growth. Employment growth also moderated, with less than 5% of companies reporting hiring growth, while outstanding business volumes increased at a marginal pace, reflecting limited pressure on capacity.

At the end of Q2, Indian services firms saw a continued rise in expenses, with labour and material costs increasing since August. Prices charged for services increased modestly, marking the slowest rate since March and aligning with long-term averages.

Despite these softer trends, business sentiment strengthened, reaching a six-month high. Companies cited advertising, efficiency gains, competitive pricing, and tax incentives as key drivers supporting optimism for the year ahead.

“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,” said Pranjul Bhandari, Chief India Economist at HSBC.

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