NEW DELHI: India's services sector lost momentum in October, easing to a five-month low after hitting a 15-year peak in August, as growth in new business and output slowed amid softer export demand and rising global competition, a private survey showed on Thursday.

The HSBC India Services Purchasing Managers' Index (PMI), compiled by S&P Global, fell to 58.9 in October from 60.9 in September and 62.9 in August, marking its weakest pace since May. The index, however, has remained above the 50-point threshold separating expansion from contraction for over four years – signalling the sector's sustained resilience despite headwinds.

While growth moderated, input costs and selling prices rose at a more measured pace, and firms stayed optimistic about future prospects, the survey noted.

"October data showed softer, although still substantial, expansions in Indian services output and new business. While factors like demand buoyancy and GST (Goods and Services Tax) relief reportedly led to an improvement in operating conditions, competition and heavy rains constrained growth," it said. "Still, companies were strongly confident of a rise in business activity over the course of the coming 12 months."

The HSBC India Services PMI draws on responses from roughly 400 companies across sectors such as consumer services (excluding retail), transport, information and communication, finance, insurance, real estate, and business services.

Beyond domestic factors, external risks are also clouding the outlook for India's services industry. US President Donald Trump's policies have added fresh headwinds for India's services industry, particularly in IT and outsourcing. Stricter H-1B visa rules and higher application fees have raised costs and curtailed the movement of Indian professionals in the US, while talk of tariffs on digital services has deepened uncertainty.

At the same time, tighter US spending and rising protectionism have slowed deal closures and squeezed margins for Indian tech firms.

"India's services PMI softened to 58.9 in October, which represented the slowest pace of expansion since May. Competitive pressures and heavy rains were cited as contributors to the sequential slowdown," said Pranjul Bhandari, chief India economist at HSBC.

"That said, the services PMI is still running well above the neutral level of 50 and its long-run average. Input costs notably increased at the slowest rate in 14 months, which provided some relief for firms," Bhandari added.

Services drag, but factories regain pace

India's composite PMI eased to 60.4 in October from 61.0 in September, with the slowdown in the services sector accounting for much of the decline.

"There was also a weaker, albeit still substantial, upturn in aggregate sales... For new orders and output, the slowdowns in growth were centred on the service economy as manufacturers actually registered quicker rates of expansion," the survey said.

"Although output charges continued to rise at an above-trend pace, the latest increase was the least marked since June. An unchanged rate of inflation at manufacturers compared with a marginal slowdown at service providers," it added.

The dip in services activity comes even as India's manufacturing sector regained momentum in October after slipping to a four-month low in September, buoyed by recent GST relief measures, stronger productivity, and a pickup in technology investments.

The HSBC India Manufacturing PMI, also compiled by S&P Global, rose to 59.2 in October from 57.7 in September, signalling a pickup in factory activity. That compares with readings of 59.3 in August, 59.1 in July, 58.4 in June, 57.6 in May, and 58.2 in April. A score above 50 indicates expansion in output.