India's services sector gathered momentum in October, with business activity expanding at its fastest pace in four months as domestic demand strengthened and companies secured more orders. At the same time, businesses saw some relief on the cost front, with input price inflation cooling to its lowest level in over six years. The HSBC India Services Purchasing Managers' Index (PMI), released on Wednesday, showed that the seasonally adjusted business activity index climbed to 55.8 in October, compared with 55.2 in September. The improvement reflected better demand conditions, an increase in new customer acquisitions and successful advertising campaigns. However, the survey also highlighted some areas of moderation, including slower employment growth and a weaker performance in international orders. New business inflows strengthened during October, with sales registering their quickest growth in four months. Companies surveyed attributed the increase to favourable market conditions, stronger domestic demand and efforts to attract new clients. All four broad service categories covered by the survey reported faster growth in business activity and new orders, indicating that the improvement was spread across the sector. Finance and Insurance emerged as the strongest-performing segment, leading the expansion in both output and new business. In contrast, Real Estate and Business Services recorded the slowest pace of growth among the four categories. While international demand continued to improve, the increase in new export orders was marginal. Export business recorded its weakest expansion in almost four years, highlighting the growing difference between domestic and overseas demand. Pranjul Bhandari, chief India economist at HSBC, said, "India’s services PMI rose to 55.8 in October, a four-month high, as business conditions improved cautiously. Although overall demand remained fairly strong, new export orders recorded the slowest pace of expansion since February 2023. Employment growth also slowed to its weakest pace since June, suggesting that some service sector businesses have sufficient capacity to meet current staffing requirements. Meanwhile, input and output prices continued to rise, but at a slower pace than in the previous month, signalling some relief from inflation pressures. India’s composite PMI increased to 56.2 in October, from 55.9 in September, marking the fastest rise in aggregate output in four months and reflecting healthy business activity." Input Cost Inflation Falls To Lowest Level Since August 2020 One of the key developments in the October survey was the moderation in cost pressures faced by service providers. Input price inflation slowed to its weakest level since August 2020, indicating a significant easing in the pace of increase in business expenses. However, the moderation did not mean that costs declined. Some companies continued to report higher spending on electricity, employee wages, raw materials and transportation. The trend also varied across different segments. Consumer Services was the only category to witness a faster increase in input costs compared with September. Meanwhile, Finance and Insurance reported the lowest degree of cost inflation among the surveyed industries. The easing in input expenses also had an impact on prices charged to customers. Less than 3 per cent of service providers increased their selling prices during October. Overall, inflation in selling charges remained marginal and slowed to its lowest level since June, suggesting that businesses were facing less pressure to pass on higher operating expenses to customers. Despite the improvement in business activity and fresh orders, employment generation lost some momentum during the month. Job creation across the services industry slowed to a four-month low. The pace of hiring was the joint-weakest during the current 10-month period of employment growth, although the overall increase in staffing levels remained marginal.