The pace of growth in India’s services sector shrank sharply in June on deceleration in new business, signalling that sustained economic recovery is yet to set in. The seasonally adjusted HSBC Purchasing Managers’ Index (PMI) for services posted a reading of 51.7, compared with May’s three-month high of 53.6.
The services sector, which accounts for about 60% of the GDP, has been under-performing due to sluggishness in the domestic economy, which expanded by 5% in 2012-13, the slowest in a decade. May had recorded a sharp pickup in services sector activity, but June’s slump could be a sign that the economy is yet to see sustained pickup.
According to the Central Statistics Office, the sector’s growth slowed to about 6.5% in 2012-13 from 8.2% in 2011-12.
The PMI index, compiled by financial information services company Markit, is based on a survey of around 350 service sector firms that try and replicate the structure of the economy.
A reading above 50 means expansion.
The sub-index for new orders dropped to a 20-month low of 51.9 from 53.2 in May.
A similar survey showed manufacturing growth in June was flat at 50.3, as production fell for the first time since March 2009 due to low domestic demand and power outages.
The composite output index, which takes into account both manufacturing and services, fell from 52.0 in May to 50.9.
According to the survey, the problem was compounding by the sharp fall in the rupee and an uptick in inflation.
India’s central bank had maintained a status quo on policy rates, as the depreciating rupee increases upside risks to inflation due to high import dependency, the survey said. In June, input prices rose at the quickest pace in three months due to higher costs of raw material, labour and fuel. There were also concerns due to unfavourable exchange rates. Volume of work-in-hand at service providers also rose marginally, with firms commenting on delayed payments from clients. Employment increased at faster rates across both the manufacturing and service sectors.
The services sector, which accounts for about 60% of the GDP, has been under-performing due to sluggishness in the domestic economy, which expanded by 5% in 2012-13, the slowest in a decade. May had recorded a sharp pickup in services sector activity, but June’s slump could be a sign that the economy is yet to see sustained pickup.
According to the Central Statistics Office, the sector’s growth slowed to about 6.5% in 2012-13 from 8.2% in 2011-12.
The PMI index, compiled by financial information services company Markit, is based on a survey of around 350 service sector firms that try and replicate the structure of the economy.
A reading above 50 means expansion.
The sub-index for new orders dropped to a 20-month low of 51.9 from 53.2 in May.
A similar survey showed manufacturing growth in June was flat at 50.3, as production fell for the first time since March 2009 due to low domestic demand and power outages.
The composite output index, which takes into account both manufacturing and services, fell from 52.0 in May to 50.9.
According to the survey, the problem was compounding by the sharp fall in the rupee and an uptick in inflation.
India’s central bank had maintained a status quo on policy rates, as the depreciating rupee increases upside risks to inflation due to high import dependency, the survey said. In June, input prices rose at the quickest pace in three months due to higher costs of raw material, labour and fuel. There were also concerns due to unfavourable exchange rates. Volume of work-in-hand at service providers also rose marginally, with firms commenting on delayed payments from clients. Employment increased at faster rates across both the manufacturing and service sectors.
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