India's services sector activity witnessed a moderate improvement in October from September's four-and-a-half year low of 44.6, even while indicating a fourth successive monthly contraction amid economic uncertainty, an HSBC survey said on Tuesday.

The HSBC/Markit purchasing managers index for the services industry inched up to 47.1 in October from 44.6 in September, the fourth successive monthly contraction of service sector output across India.

An index value of below 50 indicates contraction. Business activity fell in five of the six categories monitored by the survey, with the sharpest decline noted at hotels and restaurants, HSBC said.

"The continued contraction in service sector activity is testament to the dampening effects of the heightened macroeconomic uncertainty, which is making businesses and consumers more cautious about spending," HSBC chief economist for India and ASEAN Leif Eskesen said.

The country's economic growth slowed to 5 per cent during the last financial year that ended on March 31, from an average of 8 per cent over the past decade.

Earlier this week the HSBC/Markit manufacturing PMI showed that India's manufacturing sector activity contracted for the third straight month in October and stood at 49.6, unchanged since September, indicating a third, albeit marginal, successive deterioration of business conditions across the country.

Accordingly, the HSBC India Composite Output Index, which maps both services and manufacturing activity, rose from 46.1 in September to 47.5 in October, signalling a moderate and slower drop in private sector business activity.

"While activity readings may be stabilising, a notable recovery is not in the cards for a while still," Eskesen said adding that "despite the weak growth backdrop, the RBI has to keep its inflation guards up to address the lingering inflation pressures."

The Reserve Bank in its October 29, policy review, hiked the key lending rate by 0.25 per cent to contain inflation in continuation of its hard-line stance.

While the Wholesale Price Index (WPI) based inflation climbed to 7-month high of 6.46 per cent, the one based on Consumer Price Index (CPI) inched closer to double digit at 9.84 per cent, it said.


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