Services sector contracts for 2nd month in August on GST woes

NEW DELHI: Service activity in India continued to remain subdued in August though he downturn was less severe than in July, a private survey showed on Tuesday.

The Nikkei India Services PMI Business Activity Index rose to 47.5 in August from the five year low of 45.9 in July.

A reading about 50 on the index denotes expansion while any figure below it is a sign of contraction.

"Services acted as a drag on the private sector economy in August, with the reduction in business activity offsetting growth of manufacturing production. While July’s downturn in the goods- producing industry proved to be a temporary blip, services remained trapped in contraction," said Pollyanna De Lima, economist at IHS Markit and author of the report.

A similar survey last week showed manufacturing activity in India rebounding in August with new orders and output returning to growth territory after contracting in July.

The survey added that although manufacturing production rebounded from July’s downturn, growth was insufficient to offset the contraction in services activity.

Put together, the Nikkei India Composite PMI Output Index rose from July’s 100-month low of 46 to 49 in August.

On employment front, payroll numbers in the service economy decreased in August amid evidence of the non- replacement of voluntary leavers. The decline in employment was the second in successive months.