Service activity rebounds in December, PMI at 50.9

India’s services sector bounced back into the growth zone in December after a contraction in November, a private survey showed, adding to a clutch of upbeat data in the new year.

The Nikkei India Services Purchasing Managers’ Index (PMI) Business Activity Index rose to 50.9 in December from 48.5 in November. A reading above 50 on the survey-based index indicates economic expansion, while a reading below 50 points toward contraction.

The Nikkei India Composite PMI Output Index, which includes both services and manufacturing, rose to 53 from 50.3 in November, the highest since October 2016.


Data released earlier in the week showed core sector growth at a 13-month high of 6.8% in November, manufacturing PMI at a five-year high in December as well as robust double-digit growth by the auto sector in that month.

The government will release the first official estimate of GDP for FY18 on Friday.

ET reported Thursday that experts expect growth in the range of 6.4-6.7% for FY18, which suggests a sharp recovery in the second half led by higher growth in the fourth quarter, from 6% in the first half of the year.

“India’s service economy showed signs of recovery as it returned to marginal expansion in December,” said Aashna Dodhia, economist at IHS Markit, and author of the report.

Stable new orders and improved output helped services bounce back in December, but the goods and services tax (GST) hindered many firms from securing new business.

“The improvement in the services PMI in December mirrors the pickup underway in various other sectors,” said Aditi Nayar, principal economist at ratings firm ICRA. “Having said that, it remains to be seen whether this uptick sustains, given the frequent dips below 50 over the course of 2017,” she said.

A similar survey on Tuesday by the same organisation showed manufacturing activity expanding at the fastest pace in five years in December.

Hiring in services firms rose at the fastest pace since September and remained above average, underpinned by an overall improvement in the outlook of future business conditions.

Business sentiment was broadly similar to November’s four-month high and an expected improvement in demand conditions was cited as the key factor behind business confidence, the survey showed.

Cost inflationary pressures also eased from November, translating into service providers raising output prices at the slowest pace since mid-2017 in December.