Services sector activity in India accelerated at the fastest pace in five months in November, driven by faster growth in new business orders, a HSBC survey said today.
The HSBC India Services Business Activity Index, that tracks changes in activity at Indian services companies on a month-by-month basis, rose from 50.0 in October to 52.6 in November, registering the highest pace of growth since June.
A figure above 50 indicates that the sector is expanding, while a figure below that level means contraction.
“Service sector activity grew in November, as new business rose for the seventh month running,” HSBC Chief India Economist Pranjul Bhandari said.
The survey further said that notwithstanding the strong order flows, business sentiment slipped to the weakest level since mid-2007.
“Despite the uptick in order flows, business sentiment deteriorated, reminding us that continued policy action that addresses investor concerns is needed to sustain growth momentum,” Bhandari said.
Meanwhile, the headline HSBC Composite Output Index — that maps manufacturing as well as services sectors output also climbed to five-month high of 53.6, up from 51.0 in October.
Growth of activity and new business had little impact on service sector employment in November as workforce numbers in the Indian service sector declined for the first time in four months.
Meanwhile, prices dipped on falling commodity prices and increased competition.
Calls for a rate cut had been growing in the run up to the policy announcement, with Finance Minister Arun Jaitley also pitching for lower the cost of capital to boost growth.
However, RBI Governor Raghuram Rajan yesterday kept interest rates unchanged, saying a shift in stance is ‘premature’ but hinted that a cut may come early next year if inflation continues to ease and the government acts on the fiscal side.
Jaitley had recently said a whole set of second generation reforms would be unveiled in the next Budget and added that his immediate target is Insurance Amendment bill, Coal Ordinance and the GST bill.
Indian Nov services activity expands at fastest pace in five months – PMI
(Reuters) Activity in India’s services sector expanded at its fastest rate in five months in November, driven by surging new orders as firms cut prices on tumbling raw material costs, a business survey showed on Wednesday.
The outlook was clouded, however, by business confidence slumping to a more than seven-year low.
The HSBC Services Purchasing Managers’ Index (PMI) , compiled by Markit, rose to 52.6 in November. Growth in October had stalled at 50, the level that demarcates growth from contraction.
“Despite the uptick in order flows, business sentiment deteriorated, reminding us that continued policy action that addresses investor concerns is needed to sustain growth momentum,” said Pranjul Bhandari, chief India economist at HSBC.
The new business sub-index accelerated to 52.5 in November, its highest since July, signaling improving demand as firms cut prices for the first time in over four years.
A sharp fall in global crude oil prices coupled with softer food costs lowered consumer inflation in India to 5.52 percent in October.
The survey showed input costs for services firms fell for the first time in over five years in November.
Indian economic growth slowed to 5.3 percent in the third quarter of 2014 from 5.7 percent in the prior quarter.
The Reserve Bank of India kept key interest rates unchanged on Tuesday but hinted at a possible cut early next year if inflation remained subdued and the government controlled the fiscal deficit.
The government has identified key areas for reform, such as raising foreign investment caps on various sectors and reducing subsidies, although most of those plans have yet to be implemented.