Contracting for third straight month, India's services industry growth softened in the first month of 2017, with the slowdown in new business inflows, as firms struggled to recover from Prime Minister Narendra Modi's shock currency crackdown. The seasonally adjusted headline Nikkei India Services Business Activity Index remained below the 50 mark that separates growth from contraction, stood at 48.7 in January from 46.8 in December. As per the report, headcounts rose marginally, while work-in-hand increased for the eighth successive month. Input cost inflation slowed since December to a pace that was only marginal, whereas average selling prices decreased again.
The seasonally adjusted Nikkei India Composite PMI Output Index rose to 49.4 in January from December’s 38-month low of 47.6, pointing to a weaker contraction in private sector activity that was only marginal. The slowdown was supported by a rebound in factory production. According to the report, new orders at services firms dipped at a softer rate in January. Almost 11% of survey panelists reported falling levels of incoming new business, which they commonly associated with a relatively lower amount of cash in circulation. Concurrently, factory orders rose in the latest month.
Also, January data highlighted an increasing degree of pressure on the capacity of private sector firms’ operations as outstanding business rose to a greater extent than in December. However, sentiment among services companies improved considerably during January on the back of expectations that market conditions will soon normalize. Among the survey respondents, exactly 17% of panelists anticipate higher activity levels at their units in the coming 12 months, while the remaining firms foresee no change.