February 2022: Services Activity PMI at 51.8

India's services activity improved slightly in February as Covid-19 cases declined and restrictions were lifted, and an uptick in business confidence was seen though firms continued to shed jobs.

The seasonally adjusted India Services Business Activity Index rose to 51.8 from 51.5 in January. A reading above 50 in the index shows expansion and below that indicates contraction.

While several firms suggested that marketing efforts, demand resilience and new client wins boosted sales, there were signs that growth was hampered by input shortages, the pandemic and local elections.

As per the survey report, international demand for Indian services remained subdued in February, as indicated by a further decline in new business from abroad.

“Relatively weak growth of new business and a lack of pressure on capacity led some companies to reduce headcounts in February. The latest fall in employment was the third in successive months and the fastest since July 2021,” IHS Markit said in a release.

Companies indicated higher operating expenses in February, with chemical, energy, food, fuel, labour, metal, plastic and retail costs reported as the key drivers of inflation. The overall rate of increase was sharp, but eased from January's ten-year high.

Business confidence strengthened in February, owing to expectations that the pandemic would continue to retreat and that increased focus on customer engagement would bear fruit, but the overall degree of optimism was historically muted amid lingering concerns surrounding inflationary pressures and Covid-19.

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