India's service sector activities declined for the second straight month in October and business confidence was impacted amid concerns that challenging economic conditions might linger, says a report.
The IHS Markit India Services Business Activity Index stood at 49.2 in October and a reading below 50 indicates contraction.
"Indian service sector activity declined for the second straight month in October, the first back-to-back reduction since the second quarter of fiscal year 2017/18.
"New business stabilised, following contraction in September, while job creation moderated. At the same time, concerns that challenging economic conditions will linger dragged business confidence to its lowest level in close to three years," the report released on Tuesday said.
It noted that cost inflation climbed to a one-year high, but charges increased at a softer pace as weak demand limited pricing power.
"However, rising from 48.7 in September, the headline figure was indicative of a marginal and slower rate of reduction. Anecdotal evidence highlighted subdued demand conditions, competitive pressures and a fragile economic situation," the report said.
Citing the October data, the report said it indicated that demand weakness was centred on the domestic market, with exporters posting an increase in international sales while the upturn in external demand was modest and the slowest in four months.
Pollyanna de Lima, Principal Economist at IHS Markit, said it was somewhat worrying to see the Indian service sector stuck in contraction, as firms react to muted demand by lowering business activity.
"Perhaps even more concerning was the downward revision to future expectations, given the possible detrimental impact of subdued business confidence on investment and jobs. The latter already displayed its joint-weakest expansion in over two years," de Lima added.
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