BENGALURU, Oct 4 (Reuters) - Growth in India's dominant services sector has slowed to a 10-month low in September, according to a business survey. The HSBC final India Services purchasing managers' index (PMI) fell to 57.7 in September from a five-month high of 60.9 in August, indicating a decline in demand.
Despite the drop, the index remains above the critical 50-mark that separates expansion from contraction. International demand for services grew at its slowest pace this year, contributing to the overall decline.
Cost inflation has accelerated, with increases in prices for electricity, food, and other materials. Firms have responded by passing on some of these costs to clients, although at the slowest rate since February 2022. The business outlook for the coming year remains positive, with companies continuing to hire, extending a streak of job creation that has lasted over two years.
Indian inflation was below the Reserve Bank of India's medium-term target of 4% in July and August, with predictions suggesting it will average between 4.2% and 4.6% until at least July 2026. The Reserve Bank is expected to maintain its key repo rate at 6.50% but may reduce it by 25 basis points in December.
The overall Composite PMI, which includes manufacturing, also showed weakness, dipping to its lowest since November of last year, falling to 58.3 in September from 60.7.
Reporting by Shaloo Shrivastava; Editing by Sam Holmes