India’s services sector growth lost its momentum in the month of November, as sustained pain from the country’s Goods and Services Tax (GST) regime triggered significant decline in demand and lower customer turnout. Even as the manufacturing sector received greater inflows of new work in the month, input cost inflation and unfavorable demand conditions, also pulled the index below the 50.0 no-change mark. The seasonally adjusted Nikkei Services Business Activity Index fell to 48.5 in the month of November from 51.7 in the month of October. The Nikkei India Composite PMI Output Index, which measures both manufacturing and services was also down to 50.3 in November from 51.3 in October.
According to the survey report, the service activity fell due to a drop in new business, weighed down by GST. Input cost inflation accelerated in November month, by rising at fastest pace since October 2013 and reflecting this burden, service providers increased their average selling prices in November. However, amid intensive competitive conditions, manufacturing companies could not fully pass higher cost burdens to their consumers. The sharpest rise in input prices was noted in chemicals, steel and petroleum products.
However, in a positive development, staffing levels in the Indian service sector increased in November for a third month in succession, but at modest pace. Besides, factory employment also grew at the fastest pace since September 2012 in response to stronger growth in new orders. The report also found that inflows of new works in the manufacturing sector quickened to fastest since October 2016.