Services PMI touches 8-month high in February on fresh orders, demand: Study

NEW DELHI:India’s services sector expanded output to scale an eight-month high in February, led by a surge in new orders on improving domestic demand, a domestic private survey released on Wednesday showed. The HSBC Services Purchasing Managers’ Index ( PMI) rose to 53.9 points, from 52.4 in January, marking the fourth straight month of expansion after seeing stagnation in October.

A reading above 50 signals expansion on the index based on survey of 350 private sector firms compiled by Markit.

The data suggests that the largest contributor to the Indian economy, which was facing severe slowdown over the past two years because of manufacturing slump, may see a turnaround with the Reserve Bank of India slashing repo rate by 25 basis points to 7.5% in a surprise move on Wednesday.

Lower interest rates are expected to revive investment cycle with higher credit offtake for banking sector.

"Boosted by a solid rise in new work, services sector output in India expanded at a robust rate in February. Nonetheless, the latest improvement in economic prospects across the sector is yet to feed through to the labour market," said Pollyanna De Lima, an economist at Markit. Tevision in official base year of GDP from 2004-05 to 2011-12 saw shrinking in the share of services sector from 57% to 51%.

The overall GDP growth for 2014-15 is estimated at 7.4%, as per the advance estimates of the Central Statistics Office. Four of the six broad areas of the service economy recorded output growth, except for financial intermediation, and transport and storage, PMI data showed.

The new business subindex, which measures demand, jumped to an eightmonth high of 54.1 from 52.1, and while optimism moderated it remained fairly high, said the PMI report. The composite PMI output index of the manufacturing and services sectors rose marginally to 53.5 points in February against 53.3 in January.

Both input and output prices rose at a slower pace last month, indicating that inflation is likely to remain subdued.