India's Services Growth At 6-Month Low In January, Says Survey

The IHS Markit Services Purchasing Managers’ Index dived 51.5 in January from 55.5 in December, much below the 53.0 expected in a Reuters poll of economists

New Delhi: The services sector growth in India grew slowly in six months in January because of fresh curbs that were implemented for third wave of Covid-19 and simultaneously surging prices weighed on demand, according to a private survey.

According to a report in Reuters, the IHS Markit Services Purchasing Managers’ Index (PMI) dived 51.5 in January from 55.5 in December, much below the 53.0 expected in a Reuters poll of economists but still above the 50-mark separating growth from contraction.

Quoting Pollyanna De Lima, economics associate director at IHS Markit, Reuters said, “The escalation of the pandemic and reintroduction of curfews had a detrimental impact on growth across the service sector.”

“Both new business and output rose at slight rates that were the weakest in six months,” De Lima noted.

Since August last year, the new business sub-index was at its weakest as consumers stayed home amid rising coronavirus cases, restricting domestic demand.

Meanwhile, the global demand also remained gloomy and contracted for a twenty-third month, as it has since the onset of the pandemic. However, the contraction was moderate and the slowest in this sequence.

While the business expectations index remained above 50, it slipped to its lowest reading since August, indicating dwindling positive sentiment, said Reuters.

The rate of inflation was one of the highest since data collection started in December 2005 and is likely to reinforce views that the Reserve Bank of India (RBI) will raise interest rates next quarter in a bid to cool price pressures.

“Concerns about how long the current wave of Covid-19 will last dampened business confidence and caused job shedding. Firms were also alarmed about price pressures,” De Lima added.

Companies cut headcount for a second month in January because of the weaker demand and input costs also spiraled to a 10-year high on increased food, fuel, material, staff, and transportation costs.

The slowdown in both manufacturing and services activity pushed the composite index to a six-month low of 53.0 last month from 56.4 in December.