The services sector started on a strong note in 2021 with continued expansion in January 2021 as new business and activity expanded for the fourth month running, the latest IHS Markit India Services PMI survey showed.

The seasonally adjusted India Services Business Activity Index rose from 52.3 in December to 52.8 in January, pointing to a quicker expansion in output. Still, the headline figure remained below its long-run average of 53.3 and was consistent with a moderate pace of growth. New business rose in January, marking a four-month of expansion. The pace of growth was moderate, but accelerated from December 2020.


The Covid shot

The launch of the coronavirus vaccine programme boosted optimism towards the 12-month outlook for output.

However, employment declined further, while exports contracted sharply. There was a slower rise in input costs and prices charged for the provision of services decreased again.

Input costs increased for the seventh straight month at the start of 2021, with monitored companies reporting higher prices for fuel and a wide range of materials. Although weaker than in December, the rate of cost inflation was marked in the context of historical data. Looking ahead, service providers were confident of a rise in output in the next 12 months.

Positive sentiment was supported by belief that the roll-out of Covid-19 vaccines would underpin demand growth and improvement in the wider economy. The overall degree of optimism was at an 11-month high.