India services activity shrinks again in August, weakest since 2009

NEW DELHI: Services activity fell further in August to lowest since April 2009, a private survey showed, pointing towards more pain for the rapidly slowing Indian economy that is heavily dependent on the sector for growth.

The HSBC Services Purchasing Managers' Index (PMI), compiled by Markit, fell to 47.6 in August — the lowest since April 2009 — as the currency crisis began to weigh on the sector. The survey-based index was placed at 47.9 in July, below the 50 mark that indicates contraction. The manufacturing sector had also contracted for the first time in four years, the PMI data for the sector released on Monday had shown.

The combined index, services and manufacturing, dropped to 48.2 in August from 49.6 in July. “The numbers we have seen so far for July and August for both the manufacturing and service sectors point to a further slowdown in GDP growth during the third quarter,” said Leif Eskesen, chief economist for India at HSBC. India’s GDP growth fell to 4.4% in April-June quarter, the lowest in four years, triggering an avalanche of downgrades that now peg the full fiscal 2013-14 growth at near 4%.

HSBC attributed the moderation in the services sector to the ‘depleting orders and weakening sentiments’ and warned of downside risks in the coming months. “…the outlook is tainted with downside risks, which could materialise if politics get in the way of meaningful macroeconomic and structural policy responses,” HSBC said in a statement on Wednesday.

The new business sub-index fell to 46.6 in August from 47.8 in July, indicating a deepening decline in demand. The business expectations sub-index, an indicator of the future activity, continued to decline, falling to 63.7 in August from 67.5.