Services PMI contracts in November

NEW DELHI: India’s services activities contracted for the first time in three months in November because of sluggish demand and lower customer turnout due to the goods and services tax ( GST) rollout, a private survey showed on Tuesday. The Nikkei India Services PMI Business Activity Index declined to 48.5 in November from 51.7 in October. A reading above 50 indicates economic expansion, while that below 50 shows contraction.

“Following modest growth in the previous two months, hopes of a sustained recovery in November waned as marked growth in the manufacturing sector was broadly offset by a downturn in the service sector,” said Aashna Dodhia, economist at IHS Markit. Same survey for the manufacturing sector released last week showed manufacturing activity at a 13-month high.

The Nikkei India Composite PMI Output Index, which measures both manufacturing and services activities, fell from 51.3 in October to a three-month low of 50.3 in November.

Four of the five services categories monitored by the survey – transport & storage, consumer services, information & communications and real estate & business services – recorded reductions in new work. Finance & insurance was the only category to register growth. The services activities fell in response to a drop in new business during November. The GST Council revised the rates on a number of goods and services last month.

It slashed the GST rates on AC and non-AC restaurants to 5% from the earlier 18%. However, service providers expect benefits of GST to materialise in the next 12 months and their positive projections for business prospects were attributed to improved demand conditions and enhanced marketing initiatives.

Prices of food and fuel increased over the month. Moreover, higher taxation led to an increase in overall input prices. Input cost inflation in the service economy intensified to the fastest since October 2013, it said. On the employment front, despite unfavourable demand conditions, service providers continued to add to their workforce . That said, employment growth eased to a modest pace.