Slight improvement in services PMI in January

NEW DELHI: Activity in India’s services sector improved marginally in January but still remained in the “contraction zone” for the seventh month running, according to a private sector survey of purchasing managers. The HSBC Services Purchasing Managers’ Index ( PMI) climbed to 48.3 in January from 46.7 in December. A reading of below 50 on this survey-based index indicates contraction.

“Service sector activity remains weak and broad based, although post & telecommunication led the softening in January,” said Leif Eskesen, chief economist for India & ASEAN at HSBC.

Tough economic conditions, political issues and lower new order levels were cited as the main reasons for the fall in output, said a report compiled from questionnaires sent to purchasing executives in around 350 private service sector companies.

The PMI for manufacturing, which was released on Monday, touched a 10-month high of 51.4 in January, holding out hope that services could pick up as well, The composite PMI, which takes into account both services and manufacturing, stood at 49.6 in January compared with 48.1 in December. The economy expanded by 4.6% in the first half of 2012-13, marginally above the 4.5% recorded in 2012-13.

During the second quarter, GDP growth in the services sector fell to 5.75%, a 12-year low, dragged down largely by the government-supported community, social and personal services. Service providers reported fall in new business for the seventh month running in January, with respondents commenting on increased competition for new work, deteriorating confidence among clients and weaker underlying demand.

Service providers were optimistic in January that business activity would expand over the next year. Growth is expected to be supported by the planned increase in marketing, forecasts of an overall improvement in the Indian economy and stronger demand, the report said. Input cost inflation in the Indian private sector economy hit a three-month high, the survey showed.