Service sector growth hits seven-month low

NEW DELHI: Tepid increase in fresh orders pulled down India’s service sector growth to a seven-month low in June, a private survey showed on Tuesday. The Nikkei India Services Business Activity Index was placed at 50.3 in June, its second-lowest reading over the past 12 months that have seen readings of above 50. The headline index was down from 51 in May, pointing to a slower pace of expansion that was marginal.

A reading above 50 on this survey-based index indicates economic expansion while a figure below that indicates contraction.

“The Indian service sector saw a further cooling of growth momentum in June, the third in consecutive months, with a weaker rise in new business leading to a softer expansion in activity,” said Pollyanna De Lima, economist at Markit, the agency which compiles the index. “Moreover, future expectations dipped to the lowest since February, highlighting concerns regarding the sustainability of the economic upturn,” she said.

Growth in new business slackened to its slowest pace in 11 months. “Anecdotal evidence suggested that strong competitive pressures restricted new business gains,” the survey said. Data released by the same agency last week showed that India’s manufacturing activity was at a three-month high, with manufacturing PMI edging up to 51.7 in June from 50.7 in May. Overall, the Nikkei India Composite PMI Output Index, which combines services and manufacturing, went up to 51.1 in June from 50.9 in May, but remained below its long- term average and pointed to a slower pace of expansion.

Indian service providers signalled an increase in staffing levels during June even though factory employment was broadly unchanged for the month. Prices charged by Indian service providers continued to increase in the latest survey period. Factory gate charges were broadly unchanged, though, providing room to Reserve Bank of India governor Raghuram Rajan to cut rates before his term ends in September