India’s services sector shrank faster in December compared to the previous month, raising worries about an early revival in the economy battling to claw out of a decade low slowdown, the results of a latest monthly survey showed.
The HSBC Services Purchasing Managers’ Index (PMI), compiled by Markit, fell to 46.7 in December from 47.2 in November, indicating faltering business conditions.
PMI is a metric to measure economic activity, comparing output to sales. A reading below 50 indicates contraction in factory output. But there is a silver lining. Companies reported the strongest hiring activity since July, after four months of a near stagnant labour market.
A recovery in the services sector, which accounts for nearly two-thirds of India’s national income, is vital to turn around the economy, which grew at 5% in 2012-13: the lowest since 2002-03.
Broadly, the latest HSBC Markit data mirrors what official data has been showing.
India’s average services sector GDP grew 5.6% during July-September 2013, the lowest in more than 10 years.
The construction sector’s average growth in the past 10 quarters plunged to 4.7%, while trade, hotels, transport and communication sectors grew at a muted 6.2% in the past two-and-a-half years.
A sharp cut back in government spending was visible in the second quarter of 2013-14, as government consumption contracted by 1.1%.
The HSBC Markit survey indicated that the upcoming national elections had also contributed to the service sector’s deceleration.
This is the longest period of continuous reduction in the services sector since the global financial crisis of 2008-09.
The toxic mix of high inflation, low investments and widening deficit could not have come at a worse time for the government with national elections about four months away.
The HSBC Services Purchasing Managers’ Index (PMI), compiled by Markit, fell to 46.7 in December from 47.2 in November, indicating faltering business conditions.
PMI is a metric to measure economic activity, comparing output to sales. A reading below 50 indicates contraction in factory output. But there is a silver lining. Companies reported the strongest hiring activity since July, after four months of a near stagnant labour market.
A recovery in the services sector, which accounts for nearly two-thirds of India’s national income, is vital to turn around the economy, which grew at 5% in 2012-13: the lowest since 2002-03.
Broadly, the latest HSBC Markit data mirrors what official data has been showing.
India’s average services sector GDP grew 5.6% during July-September 2013, the lowest in more than 10 years.
The construction sector’s average growth in the past 10 quarters plunged to 4.7%, while trade, hotels, transport and communication sectors grew at a muted 6.2% in the past two-and-a-half years.
A sharp cut back in government spending was visible in the second quarter of 2013-14, as government consumption contracted by 1.1%.
The HSBC Markit survey indicated that the upcoming national elections had also contributed to the service sector’s deceleration.
This is the longest period of continuous reduction in the services sector since the global financial crisis of 2008-09.
The toxic mix of high inflation, low investments and widening deficit could not have come at a worse time for the government with national elections about four months away.
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