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India’s services sector is yet to come out of contraction, according to an HSBC survey.
The HSBC Service Purchasing Manager Index (PMI) inched up to 47.2 in November from 47.1 in October. This was the fifth sub-50 reading in as many months. A reading below 50 shows contraction.
Five of the six broad sectors covered by the survey recorded lower business activity, the exception being Post & Telecommunication. For the third successive month, the sharpest drop was noted at Hotels & Restaurants.
“Service sector activity remains subdued, but would at least appear to be stabilising,” the Chief Economist (India and ASEAN) at HSBC, Leif Eskesen, said. It may be noted that the latest economic growth data shows services sector growth during three months period ending September 30, 2013 slowed down to 5.9 per cent from 6.6 per cent in first three months (April-June) of 2013-14.
The HSBC India Composite Output Index, which maps both services and manufacturing activity, grew to 48.5 in November from 47.5 in October, but remained below the 50-mark. It happened even as HSBC PMI for manufacturing climbed to 51.3 in November from 49.6 in October.
Outlook Eskensen said looking ahead, economic activity is expected to remain soft in the coming months as high inflation, tighter financial conditions, and structural constraints continue to weigh on growth. Wholesale Price Inflation for the month of October was 7 per cent while the retail inflation, based on Consumer Price Index (CPI), swelled to 10.09 per cent during the month, mainly on account of high food prices. To curb high inflation, the RBI had hiked policy interest rates by 25 basis points each in September and October.
Indian services companies passed higher cost burdens through to clients in November. Average selling prices rose at a moderate rate. Private sector output price inflation hit an eight-month high in November.
Indian services companies anticipate higher business activity in the coming year, with the degree of optimism hitting a three-month high. Panellists expect better economic conditions and stronger demand in the year ahead. There were also mentions that business conditions should improve after the elections.
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