India (Commonwealth Union)_According to a private study, the activity in India’s services industry declined in September to a six-month low, mostly due to a significant slowdown in demand amid high inflation. According to Pollyanna De Lima, associate director of economics at S&P Global Market Intelligence, “From 57.2 in August to 54.3 in September, the S&P Global India services Purchasing Managers’ Index decreased. According to the most current PMI data, the Indian service sector is still performing well despite a little slowdown in growth in September, Although the demand indicator known as the new business sub-index dramatically decreased to its lowest level since March, it remained over 50 for the fifteenth consecutive month. Due to rising energy, food, labor, and material costs, demand decreased as businesses increased prices for the 19th month.”
Since May, the Reserve Bank of India (RBI) has increased interest rates by 190 basis points to combat inflation and partially counteract the negative impacts of the aggressive rate increases made by the U.S. Federal Reserve, which have hurt the value of numerous currencies, including the rupee. “Currency volatility raises additional concerns about inflation as imported goods become more expensive, and surely implies that the RBI will continue raising interest rates to safeguard the rupee and restrain price pressures,” De Lima continued
In the upcoming months, “an increase in inflation might harm consumer spending, erode corporate confidence, and put the Indian service sector’s resiliency to the test.” Although fewer positions were added than in August, hiring in the industry kept up for a fourth month. The industry kept hiring for a fourth month, but fewer positions were added than in August.
Last week, both S&P and the Organization for Economic Co-operation and Development (OECD) maintained their FY23 growth projections for India at 6.9% and 7.3%, respectively. The increasing negative dangers have been emphasized. Softer external demand is a contributing factor in India’s expected decline from 8.7% annual growth in 2021–2022 to around 7% in FY23 and roughly 5.75% in 2023–2024. The OECD stated in its interim Economic Outlook that despite the sluggish global economy, this still constitutes strong growth. The future activity sub-index, which gauges optimism, surged to its highest level in nearly eight years, raising prospects for more growth. This was the silver lining. As a result of weaker demand, the manufacturing and services sectors also shrank, resulting in a slower overall S&P Global India Composite PMI Output Index of 55.1 from 58.2 in August.
