The activity in Indian services sector, which accounts for around 60% of country’s GDP remained stagnant in the month of October following the five successive month-growth, adding to pressure on the government to take necessary economic reforms. The HSBC services Purchasing Managers’ Index (PMI), based on the survey of around 350 private service sector companies, fell to six-month low at 50 in October from 51.6 in the month of September. Services providers linked stagnation in activity to weaker growth of new business. Despite rising for the sixth consecutive month, new work intakes in the Indian service sector increased at the weakest pace during October.
The HSBC survey highlighted that among the monitored sub-sectors, the best-performing was Post & Telecommunications, whereas activity fell quickest in Hotels & Restaurants. Indicating expansion at weaker pace than previous month in business activity overall, the HSBC India Composite Output Index, which measures activity in both the manufacturing and services sector, fell to 51 in October from 51.8 in September. Employment in the Indian service sector also slowed in October as the rate of job creation was marginal overall and weaker than the long-run series average. Amid continuing expansion in new business and stagnant employment level, backlogs of work at service sector firms in India accumulated at the quickest rate in three months during October.
The Survey indicated a steady inflation trend with input prices faced by Indian services companies rose for 67 consecutive months in October. However, the rate of cost inflation was unchanged from September and was the joint-weakest since November 2009. According, services providers increased selling prices in October, marking a four-year period of charge inflation. Though, the rate of inflation was slight overall and muted in comparison with historical data. The prices charged sub-index only nudged up to 50.7 from September’s near four-year low of 50.6.
On business outlook, services firms remained optimistic for output growth over the next 12 months as business sentiment was the strongest in three months. The survey indicated that anticipated improvements in demand and new marketing initiatives were leading factors credited for strongest improvement in business confidence among services firms.
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