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Services sector activity in May increased at its fastest pace in the past four months, led by a faster increase in new business inflows, according to a private monthly survey.
The Nikkei India Services PMI Business Activity Index rose to 52.2 in May from 50.2 in April, the fastest increase in output in the current four-month sequence of expansion.
“The headline number was, however, indicative of a moderate pace of growth that was below the series average (54.8),” it said in a release.
A reading over 50 denotes expansion while one less than that indicates contraction in production.
Composite Output Index The Nikkei India Composite PMI Output Index also reached a seven-month high of 52.5 in May from 51.3 in April. However, in contrast, the Nikkei Markit India Manufacturing PMI, which is included in the Composite PMI Index, had slumped to a three-month low of 51.6 in May.
The data comes just ahead of the second bi-monthly monetary policy on June 6 and 7.
The Reserve Bank of India (RBI), in its last monetary policy review meet on April 6, had maintained the repo rate at 6.25 per cent, but increased the reverse repo rate to 6 per cent from 5.75 per cent.
“The pick-up in service sector growth seen mid-way through the first quarter suggests that the GDP could expand at a faster rate should the growth momentum be maintained in June, though there are downside perils to this,” said Pollyanna De Lima, economist at IHS Markit, and author of the report.
She noted that concerns over low growth might prompt the RBI to lower the benchmark rate to support the economy. Official estimates have already pegged economic growth in the fourth quarter of last fiscal at a mere 6.1 per cent.
Bright spot According to the survey, the posts and telecommunications sector is a “bright spot” in May, with expansion rates for both activity and new business surpassing those seen in financial intermediation and ‘other services’. However, output and new work fell elsewhere.
The higher growth in activity was led by more business inflow based on higher demand. Businesses also hired additional staff to meet the orders.
Though input costs increased, the rate of inflation was negligible.
But business sentiment weakened on the back of growing concerns regarding competitive pressures.
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