India’s service sector activity improved in the month of February, as COVID-19 cases declined and restrictions were lifted. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index surged to 51.8 in February from 51.5 in January. Further, the Nikkei India Composite PMI Output Index -- which measures both manufacturing and services -- also improved to 53.5 in February from 53.0 in January.
The report noted that there was a faster increase in new business inflows to service providers that was nevertheless weaker than seen on average over the survey history. However, international demand for Indian services remained subdued in February, as indicated by a further decline in new business from abroad. Moreover, the rate of reduction was solid and the fastest since last September.
On the inflation front, companies indicated higher operating expenses in February, with chemical, energy, food, fuel, labour, metal, plastic and retail costs reported as the key drivers of inflation. The overall rate of increase was sharp, but eased from January's ten-year high. Charges levied by service providers were revised upwards in February as companies continued to transfer additional cost burdens to clients.
Meanwhile, business confidence strengthened in February, owing to expectations that the pandemic will continue to retreat and that increased focus on customer engagement would bear fruit. That said, the overall degree of optimism was historically muted amid lingering concerns surrounding inflationary pressures and COVID-19.
