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Services PMI improves to 48.3 in January, but remains below 50 mark

06 Feb 2014 Evaluate

Amid prevailing economic slowdown in the country, the activity in India's services sector, which make up nearly 60% of country’ economics output, remained subdued for the seventh straight month in January owing to the falling new orders amid tough economic conditions and political issues. The HSBC Services Purchasing Managers’ Index (PMI), based on the survey of around 350 private service sector companies, posted a reading at 48.3 in January below 50 mark that separates growth from contraction. Meanwhile, the downturn in Indian services activity eased slightly in the reported month as compared to 46.7 recorded in the previous month, December. Showing a further contraction in business activity overall, the HSBC India Composite Output Index, which measures activity in both the manufacturing and services sector, recorded at 49.6 in January as against 48.1 in December.

The HSBC survey indicated that increased competition for new work, deteriorating confidence among clients and weaker underlying demand were the main reasons for decline in new businesses in the month under review. However, the rate of new order contraction was slight and the slowest in that sequence. Among the five monitored service sectors covered by the survey, Post & Telecommunication was best performing services sector, recording higher output and new business. On the other hand, Financial Intermediation suffered the sharpest declines in both business activity and new orders.

In spite of having lower new orders, service providers hired additional workers in January amid expectations of higher new orders in coming months. The growth is expected on the back of supportive factors such as planned increases in marketing, forecasts of an overall improvement in the Indian economy and stronger demand. Outstanding business in Indian service sector also fell in January. Further, HSBC survey signaled broadly a steady inflation reading with input costs across the private sector rising at three-month high rate in January.

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