Survey data indicated that while activity continued to expand, the momentum seen earlier in the year showed signs of moderation as 2026 began.

The Services Purchasing Managers’ Index remained firmly in expansionary territory, signaling resilience, but the decline highlighted emerging headwinds.

A key factor behind the slowdown was weaker growth in new business, which recorded its slowest pace in almost a year.

Service providers reported that although client interest remained positive, competitive pressures intensified across several segments.

Companies noted increasing competition from alternative service providers offering lower-cost solutions, limiting the pace of new order inflows.

The employment landscape also softened, marking a notable shift after more than three years of continuous hiring expansion.

In December, firms largely froze recruitment, with a marginal reduction in staffing levels reported across the sector.

An overwhelming majority of surveyed firms chose to maintain existing workforce strength rather than expand payrolls.

This pause in hiring reflects a more cautious outlook as companies reassess demand conditions and cost structures.

Business sentiment regarding future activity weakened for the third straight month, reaching its lowest level in over three years.

Despite the dip, optimism has not disappeared entirely, with firms still expecting growth, albeit at a more measured pace.

External demand offered a positive counterbalance, as new export orders strengthened after slowing in previous months.

This uptick suggests that global demand for Indian services remains supportive, particularly in technology and business services.

On the cost side, input price pressures increased moderately compared to November but stayed below long-term averages.

Firms cited higher operational and material costs, though these increases were not considered disruptive.

Output price inflation remained muted, with only a small fraction of companies raising their service fees.

This restrained pricing environment reflects intense competition and a desire to protect market share.

Low inflationary pressure may benefit consumers and clients by keeping service costs stable in the near term.

Economists suggest that manageable cost increases could help firms remain competitive and support gradual demand recovery.

The broader economic picture mirrored this trend, with combined services and manufacturing activity also easing.

Manufacturing growth slowed to its weakest pace in two years, contributing to a softer overall business activity reading.

Nevertheless, the composite index remained well above contraction levels, underlining continued economic expansion.

India’s services sector remains a critical pillar of the economy, accounting for a significant share of output and employment.

Even with the slowdown, activity levels remain historically strong compared to global peers.

Analysts caution that the moderation may reflect a normalization after prolonged post-pandemic growth rather than a sharp downturn.

Policy stability, steady domestic consumption, and improving global conditions could help support services growth ahead.

Export-oriented services, in particular, may benefit from stronger overseas demand as global markets stabilize.

The coming months will be crucial in determining whether December’s slowdown is temporary or the start of a broader trend.

For now, the data points to a resilient sector navigating a phase of adjustment rather than contraction.

Overall infrastructure output rose on a year-on-year basis, supported primarily by robust growth in cement and steel production, both of which are closely linked to construction and manufacturing activity.

The performance highlights continued momentum in sectors tied to housing, urban development, and public infrastructure projects across multiple regions of the country.

Cement production emerged as a standout contributor, registering strong double-digit growth that signals sustained demand from real estate, highways, and public works initiatives.

Rising cement output suggests that construction activity remained resilient in November, backed by ongoing government spending and private sector investment.

Steel production also recorded healthy growth, reflecting steady demand from infrastructure, capital goods, and manufacturing segments.

Together, cement and steel trends indicate that core industrial activity remains aligned with India’s long-term development priorities.

Fertiliser production showed positive growth as well, pointing to stable activity in the agriculture-linked industrial segment and continued support for the farming sector.

Coal production returned to growth after a previous contraction, highlighting improvements in mining output and supply conditions.

This recovery in coal production supports power generation, manufacturing, and transportation needs, reinforcing energy security.

Electricity generation saw a smaller decline compared to the previous month, suggesting gradual stabilization in power demand and generation patterns.

Lower contraction in electricity output reflects better balance between supply and consumption as industrial and commercial activity adjusts seasonally.

Natural gas production declined at a slower pace than earlier, indicating incremental improvements in output trends across the energy sector.

Crude oil production continued to face challenges, yet the overall impact on infrastructure output was offset by stronger performance in construction-related industries.

The infrastructure index, which covers eight core sectors and accounts for a significant share of industrial production, remains a key indicator of economic health.

Despite some month-to-month revisions, the November data points to underlying stability rather than weakness in core industrial activity.

Government-led capital expenditure, particularly in roads, railways, housing, and urban infrastructure, continues to support demand for construction materials.

Private sector participation in infrastructure development has also contributed to sustained output in steel, cement, and related industries.

The balanced performance across multiple sectors underscores the diversified nature of India’s infrastructure base.

As economic activity remains supported by domestic demand, infrastructure output is expected to benefit from ongoing policy focus on investment and growth.

Looking ahead, steady performance in core industries provides a supportive foundation for industrial production and overall economic momentum in the coming months.

The latest official data indicates that disruptions caused by major festivals, a reduction in working days, and softer demand across several categories collectively weighed on overall activity during the month.

The manufacturing sector, which forms the largest component of industrial production, grew 1.8 percent in October. This was markedly lower than September’s revised 5.6 percent rise, reflecting broader cooling in factory activity.

Industry observers noted that production schedules across many manufacturing hubs were interrupted by holiday closures, while several firms chose to scale back output due to inventory alignments.

The electricity sector saw one of the steepest declines among the major segments, contracting by 6.9 percent during the month.

Officials attributed this dip to extended monsoon conditions and cooler temperatures, which reduced power consumption across households and businesses. Lower energy demand played a notable role in pulling down the overall index of industrial production.

Mining activity also slowed, registering a 1.8 percent decline in October compared to a smaller contraction of 0.4 percent in the previous month.

Analysts said that weather-related disruptions and transport delays during the monsoon contributed to the subdued output. The mining sector’s slowdown continues to influence supply availability for downstream industries that rely heavily on raw materials.

Consumer durables production, including automobiles, electronics, and household appliances, fell by 0.5 percent in October. This marked a reversal from the strong 10 percent revised expansion seen in September.

Industry experts noted that while festive season sales typically boost demand, manufacturers appeared cautious this year due to uneven consumer sentiment and fluctuating input costs.

The non-durables category, which includes daily-use goods such as packaged food and personal care items, recorded a sharper 4.4 percent decline compared to a revised drop of 0.3 percent in September.

Analysts noted that the slowdown in rural markets, combined with temporary supply chain adjustments, contributed to the contraction in output of essential goods.

Capital goods, considered a key indicator of investment activity, rose by 2.4 percent in October, though this was lower than September’s revised 5.4 percent expansion.

The moderation suggests that while investment demand remains positive, momentum is currently uneven as businesses navigate global uncertainty and domestic cost pressures.

Across the April-October period, industrial output grew 2.7 percent compared with a 4 percent expansion during the same period last year.

Economists expect activity to stabilize gradually in the coming months, supported by government infrastructure spending and improving global conditions.

However, they caution that sustained recovery will depend on demand revival, easing financing costs, and a rebound in exports.

The October data comes at a time when policymakers continue to assess the broader trajectory of India’s economic growth amid global headwinds, volatile commodity prices, and shifting trade dynamics.

While the slowdown reflects temporary disruptions associated with seasonal factors, it also highlights existing challenges faced by industries in maintaining consistent output levels.

Market participants remain attentive to upcoming economic indicators as they assess the medium-term growth outlook for Asia’s third-largest economy.