Indian services growth loses more steam in April; HSBC Sevices PMI at 3-month low

NEW DELHI: Activity in India’s services sector slowed to a three-month low in April as domestic demand softened and output rose at a modest pace, a private survey showed on Wednesday. Inflation remained muted, adding to data that back a rate cut at the central bank’s next policy review.

The HSBC Purchasing Manager’s Index for services fell to 52.4 in April from 53 the previous month, but marked the sixth straight month of expansion, after stagnating in October.

A reading above 50 denotes expansion. The index is prepared based on a survey of 350 private sector firms, compiled by Markit. “The slowdown in the Indian service sector continued in April, with weaker activity growth reflecting softer demand conditions. Accompanying the subdued outlook in the opening month of the fiscal year was a return to job shedding as companies maintained a costcautious approach,” said Pollyanna De Lima, an economist at Markit.

Growth in new businesses fell to a sixmonth low, with a reading of 51.6 in April, compared with 53.5 in March. Output rose in five of the six broad services sector categories with post & telecommunication posting the fastest growth. Activity shrank in the hotels & restaurants segment.

Services are the largest contributor to the economy with a share of 51%. Growth in gross domestic product for 2014-15 is estimated at 7.4%, as per the advance estimates of the Central Statistics Office.

India’s services exports stand at about $145 billion, close to half of the merchandise exports of more than $300 billion. The government aims to double India’s combined exports to $900 billion by 2019-20. Reflecting stronger demand conditions and improved marketing strategies, new orders in the services sector rose during April, but at a modest pace, the report said.

The PMI data showed inflationary pressures remained muted as producers reduced tariffs to get business. This might prompt the Reserve Bank of India to cut rates before the policy meet on June 2. “Inflation rates for both input and output prices were weak by historical standards, providing the RBI with more scope for further rate cuts,” said De Lima. “An expansionary approach to monetary policy would, at a time when the economy is losing traction, provide much-needed support for further growth.”