India services sector expands at four-month peak as inflation moderates

India's services sector demonstrated resilience in October as business activity expanded at the fastest rate since June, with the HSBC Services Purchasing Managers' Index climbing to 55.8 from 55.2 in September. The uptick reflects strengthening domestic demand across the services economy, which continues to be a bright spot for India's overall growth trajectory as manufacturing activity remains relatively subdued.

A key tailwind for the sector came from moderating cost inflation, which has been a persistent headwind for Indian businesses over recent months. Companies reported slower increases in input costs and staff expenses, providing some relief to profit margins even as they continued to expand output and service delivery across various segments.

The expansion was not uniformly broad-based, however. Export orders for Indian services weakened during the period, signalling potential challenges from global economic headwinds and softer international demand. Employment growth also decelerated, with service providers showing greater caution in expanding their workforce despite healthy overall business expansion.

The services sector, which accounts for nearly 55 per cent of India's economic output, remains a critical growth driver for the nation. The October data suggests the sector's momentum is holding despite global uncertainties, though sustained expansion may depend on whether domestic demand can remain resilient and international conditions stabilise.