August service activity peaks at over three year high of 54.7

NEW DELHI: Buoyed by improved new work inflows and increased levels of business confidence, service activity gathered momentum in India in August, a private survey showed on Monday.

The Nikkei India Services Business Activity Index was at its three and a half year high of 54.7 in August compared with 51.9 in July indicating a "solid rebound in the rate of expansion in Indian service sector business activity".

A reading above 50 on the index indicates economic expansion while a figure below that indicates contraction.

Data released by the same agency last week showed that India's manufacturing output grew at its fastest pace in thirteen months in August. The two sets of data will instil confidence in policymakers who saw Indian economy expand at below expected growth of 7.1% in the first quarter of 2016-17.

Put together, the seasonally adjusted Nikkei India Composite PMI Output Index climbed from 52.4 in July to a 42-month high of 54.6 in August, highlighting a stronger improvement in private sector economic activity.

However, the trend in employment remained comparatively subdued with a slight decrease in jobs signalled for the first time since September of last year.

"The service sector showed upbeat levels of performance in August...a further uptick in backlogs – the sharpest in nearly two years – may lead service providers to create jobs in coming months," said Pollyanna De Lima, Economist at Markit and author of the report.

De Lima guided that PMI data suggest that the service sector looks set to maintain its strong performance in the months ahead.