Services Sector Activity in July at 21-Month High

Buoyed by higher demand and new business orders, India’s services sector activity expanded to hit a 21-month high in July.

The Nikkei India Services Business Activity Index rose to 54.2 from 52.6 in June.

A reading of over 50 on this survey-based index indicates expansion and below that means contraction. Manufacturing purchasing managers’ index released earlier showed a marginal decline in July to 52.3 from 53.1 in the previous month, but underlying momentum remained strong.

The Composite PMI Output Index, which comprises both services and manufacturing, rose to 54.1 in July from 53.3 in June.

The services activity index is based on a survey conducted among purchasing executives of more than 400 services providers divided into six categories: consumer services, transport & storage, information & communication, financial & insurance, real estate and business services.

Companies hired at their fastest pace since April as demand improved. Panellists cited higher output requirements as the key factor behind job creation.

Jobs growth was evident across all broad sub-sectors. Business confidence regarding the 12-month outlook also picked up from the low recorded in June.

The survey highlighted “some warning signs” that could lead to further monetary tightening.

An uncertain global climate, currency weakness and strong inflation may continue to place pressure on the central bank to hike interest rates over the coming months. RBI had raised key interest rates on Wednesday by 25 basis points, its second tightening after the previous policy announcement in June.

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