The growth in the business activity in India’s services sector is at a three month high in December, at 55.6 according to HSBC Services Business Activity Index. In November, the Index reading was 52.1.
In December, the HSBC India Composite Output PMI is at 56.3, its highest point since last February. In November, the Index had posted 53.2. After a contraction in business activity in the last two months, this is a clear sign of recovery.
The PMI index measures the activity of private sector companies in India, surveying around 350 private sector companies. An index reading above 50 shows an expansion in business activity, while an index reading below 50 is the sign of a contraction.
There was a steep rise in the private sector output. The rate of growth of the new orders in the private sector was at its peak since February. There was also an ease in the input and output price inflation in the private sector. The inflation rate eased because the Reserve Bank of India had kept the repo rate at eight percentage since April 2012, despite the mounting pressure to make cheap credit accessible.
“The service sector provided some holiday cheer with activity fully recovering after two months of deceleration, led by a sharp rise in new business. Inflation readings, meanwhile, eased a bit. With growth showing signs of recovery and inflation still elevated, the case for a policy rate cut is not yet convincing. However, the RBI has clearly teed up for rate cuts in January-March.”, said Leif Eskesen, Chief Economist for India & ASEAN at HSBC.
There was an increase in the rate of employment in the services sector, though the increase in the rate of employment was the slowest in the last ten months. Even though the input prices went up, the rate of growth in the input prices was at a thirty-month low. The volume of the work undertaken by the private sector too went up. 46% of the companies surveyed by HSBC said that they expect an expansion of activity in the next year. Given the weakening state of the economy, the performance of the services sector is promising.
