Service sector activity hits 19-month high in January: PMI

Service sector

New Delhi, Feb 3 : Services sector expansion propelled economic activity in India during January, touching a 19-month high driven by firming up of underlying demand, a key macro-economic data showed on Wednesday.

The Nikkei Business Activity index climbed to a 19-month high of 54.3 last month from 53.6 in December, pointing to a marked expansion of activity across the sector.

An index reading of above 50 indicates an overall increase in the economic activity, below 50 an overall decrease.

The overall increase in services output was mainly driven by a seventh successive monthly expansion of new business orders.

“The services sector gained traction and posted its strongest monthly gain in activity for over one and a half years,” said Pollyanna De Lima, economist at Markit, which compiles the survey.

Instead, the Nikkei India Composite PMI Output index, which tracks both manufacturing and services sectors, rose from 51.6 in December to an 11-month high of 53.3 in January.

“The Indian economy shifted into a higher gear in January, supported by a quick rebound in manufacturing production following last month’s floods,” De Lima said.

She said a strong upturn in new business as seen from the January survey underpins hopes for further near-term growth of activity in India’s private sector.

Amid forecasts of further improvement in demand and favourable government policies, survey respondents expected output to continue to increase over the course of next year.

This upswing in demand may boost the labour market and help end the long run of subdued employment trends,” De Lima added.

Higher workloads in January provoked service providers to hire additional staff, following a stagnation in the previous month, while manufacturing jobs also rose at a marginal rate, the survey showed.

Meanwhile, awaiting the federal budget for the next fiscal and a better picture on inflation, the Reserve Bank of India (RBI) on Tuesday kept its key lending rates unchanged during its sixth and the fiscal’s final bi-monthly monetary policy review.

“The Reserve Bank continues to be accomodative even as it leaves the policy rate unchanged in this review, while awaiting further data on inflation,” RBI Governor Raghuram Rajan said in his policy statement.

“Structural reforms in the forthcoming union budget that boost growth while controlling spending, will create more space for monetary policy to support growth, while also ensuring that inflation remains on the projected path of 5 percent by 2016-17,” he added.

India’s CPI, or retail, inflation has been rising. As per data released last month, annual retail inflation moved up further to 5.61 percent in December, from 5.41 percent during the month before.

With food items, notably pulses and onions, continuing to remain dear, India’s annual wholesale inflation rate moved up for the fourth straight month to minus 0.73 percent for December, against minus 1.99 percent for the month before.

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