India’s services sector witnessed a modest dip in growth rate last month and also saw some job cuts for the first time in three months, according to a survey.
The HSBC Services Business Activity Index stood at 56.5 for the month of February, down from 58 in the previous month, despite an increase in new orders and an uptick in business sentiments.
A score above 50 indicates growth in the sector, while a reading below 50 means the segment is contracting.
However, the HSBC survey found that a moderate rate of job cuts was indicated by manufacturers and the overall staffing levels also fell slightly.
The job cuts in February followed two consecutive months of a marginal increase in employment levels.
The HSBC India Composite Index — which covers both the manufacturing and service sectors — was at 57.8 for the month of February, down from a nine-month high level of 59.6 in January.
On an optimistic note, Mr Leif Eskesen, Chief Economist for India & ASEAN at HSBC, said the outlook for the sector looked “well supported”.
“Activity in the service sector expanded at a slightly slower clip in February, but a continued strong increase in new business and an uptick in the sentiment gauge suggests that activity will remain well-supported in the months ahead,” Mr Eskesen said.
According to the report, service companies in India were optimistic about rising activity over the next year, owing to higher new work intakes, alongside ongoing improvements in market conditions.
New business received by Indian service providers reported an increase during February, largely driven by new client wins.
Manufacturers reported a marginal strengthening in new order growth. The expansion of overall new work intakes accelerated slightly to reach an 11-month high, HSBC said.
“As service sector activity is expected to stay relatively brisk and inflation is likely to hover above the comfort zone, the RBI will have to approach the easing cycle cautiously. In addition, oil prices could have an impact on the timing as well as speed of rate cuts,” Mr Eskesen said.
India’s economy grew at 6.1 per cent in the third quarter this fiscal, the slowest in over two years, prompting corporates and experts to press for faster reforms to boost industrial output.
The economy had expanded by 8.3 per cent during the corresponding quarter a year ago.