Services sector activity in India plummeted to a six-month low in September due to a significant fall in demand amid high inflation, according to the findings of a private survey.

The S&P Global India services Purchasing Managers' Index declined to 54.3 last month, from August’s reading of 57.2. Although the index remained in growth (above the 50-mark) for the 14th consecutive month, it fell to it lowest level since March.

"The Indian service sector has overcome many adversities in recent months, with the latest PMI data continuing to show a strong performance despite some loss of growth momentum in September," said economics associate director at S&P Global Market Intelligence, Pollyanna De Lima.

In addition, global demand, which hasn’t yet rallied since the start of the pandemic, remained under the 50-level. That said, the decline was the lowest since January, Economic Times reports.

Demand came to a slowdown as businesses hiked prices for the 19th straight month amid elevated energy, food, labour and material costs.

The central bank has increased interest rates by 190 basis points since May in a bid to curtail inflation and offset the impact of Federal Reserve rate hikes that have weakened several currencies, the Rupee being one of them.

Moreover, foreign reserves in India have fallen by close to $100 billion to $545 billion after the Reserve Bank of India attempted to bolster the Rupee. They were forecast to fall to $523 billion by year-end, according to the findings of a Reuters survey.

"Currency instability poses renewed inflation worries as imported items become more costly, and undoubtedly means that the RBI will continue hiking interest rates to protect the Rupee and contain price pressures," De Lima added.

"An upturn in inflation could damage consumer spending, dampen business confidence and test the resilience of the Indian service sector in the coming months."