Services' PMI : February 2014

Private sector output in India expanded for the first time in 8 months in February as slump in the services sector moderated and manufacturing grew at a stronger pace.The HSBC India Composite Output Index, which maps both services and manufacturing, stood at 50.3 in February, slightly higher than 49.6 in January, indicating a fractional rate of expansion.
The latest growth was centred on the manufacturing sector, HSBC said. A PMI reading above 50 indicates growth while a lower reading means contraction.
The HSBC services business activity index rose from 48.3 in the previous month to 48.8 in February.
Weaker demand, a fragile economy and competitive pressures led to a decline in new business placed with Indian services firms, HSBC said.
On price rise the survey said that while inflation for input prices eased a bit, it picked up for prices charged as businesses passed on higher costs to clients.
The annual rate of inflation, based on the monthly wholesale price index, eased to a seven-month low of 5.05 per cent in January.
Reserve Bank of India (RBI) Governor Raghuram Rajan had raised the key policy rate by 0.25 per cent to 8 per cent in the third quarter review of monetary policy in a bid to curb inflation.
After Rajan took over as RBI Governor in September, the apex bank increased the key policy rate three times by 0.25 per cent each.
Moreover, fiscal policy tightening to meet the deficit target will hold back government spending. This suggests that growth will remain subdued in coming months.
The weak PMI follows lower-than-expected GDP growth of 4.7 percent at the end of 2013, suggesting there may be worse to come for the economy as India heads into an election due by May.
But firms did pass on higher costs to clients, suggesting consumer price inflation, which was at 8.79 percent in January, could rise further.