Services sector activity at 4-year low

Business conditions in India's services sector deteriorated in July, following implementation of the GST. Output and new work declined for the first time since January. The Nikkei India Services PMI business activity Index plunged from June's eight month high of 53.1 to 45.9 in July, its lowest level since September 2013.

The PMI survey said this had an adverse effect on the labour market, with employment contracting over the month. Firms expressed a lack of knowledge regarding GST and expect more clarity to come in near-term to lead to growth in activity. Confidence for the year ahead was, in fact, the strongest since August 2016. The rollout of GST has been smooth so far, except a few bumps and expectations are that business condition will return to normal as more clarity on the tax measure emerges.

On the price front, input cost inflation eased from June, while charges were raised to the greatest extent since early-2013. Data released earlier showed the PMI manufacturing sector index had plunged to near nine-year low, weighed down by GST implementation.

No comments: