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The HSBC Purchasing Managers’ Index (PMI) for the services sector slipped below the crucial level of 50 to 49.6 in May, the first time it has done so in 13 months. In April, the index was at 52.4. A score above 50 reflects expansion, while one below 50 indicates a contraction.
Services contribute around 57 per cent to India’s GDP. The HSBC index is prepared on the basis of responses from 350 purchasing managers in private companies across sectors such as hotels & restaurants, transport & storage, financial intermediation, and renting & business.
Disruption in the north Responses to the survey suggest that the earthquake in April disrupted services in north India, the impact of which should be temporary. On the positive side, business expectations improved and firms expanded workforces, but only marginally. However, the adverse impact on rural incomes from poor rains is a rising risk to growth recovery, it said.
Pollyanna De Lima, Economist at Markit, which compiled the data, said that restrained demand accompanied by sweltering heat and the earthquake led to falling new work. “Nonetheless, the sector is expected to see a rebound in coming months, as these factors fade away. An upturn in employment combined with improved business confidence further add to the evidence that prospects may brighten,” she said.
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