)
The dominating sector of the Indian economy--services--began the financial year 2012-13 on a dismal note with its growth falling to its lowest level in April, 2013 since October, 2011, when output of the tertiary sector last contracted, shows the widely-tracked HSBC purchasing managers' index (PMI). This may at least prolong the wait for green shoots of economic recovery which the policy makers are hoping for, if not dashing it completely, analysts said.
PMI for services fell to 50.7 points in April, the bottom of the index since October, 2011 when it stood at 49.1 points as companies complained of extreme hot weather and weaker gains in incoming work. .
Reading above 50 points means growth, while below it is a contraction. In fact, PMI had stood at 51.4 points in March, 2013, which was the lowest level since October, 2011 at that time. As such, services sector growth has been falling at steep rates for the last two months.
In April, the index fell considerably from the average reading registered in the last quarter of 2012-13 --54.3 points. Companies in the PMI survey said slower growth reflected weaker gains in the incoming new work.
As reported earlier, PMI for manufacturing sector also fell to its lowest level in April since November 2011. Combining both the PMIs, the composite index fell to 50.5 points in April, again the slowest pace since October 2011. The index was 51.4 points in March.
Services sector is the largest sector of the economy, constituting more than 60% of its GDP if construction is included in the tertiary sector.
In the third quarter of 2012-13, when GDP growth fell the lowest of around three years at 4.5 %, the services sector could grow by just 6.02 % against 8.09 % in the corresponding period of 2011-12 when the overall economy expanded six %.
However, it was only services sector which provided some kind of support to the GDP growth in Q3 last fiscal.
If PMI data for services are corroborated by official GDP data, then all talks of green shoots may wither, analysts said. However, it is only the first month data and one should wait for more data to conclude a trend, they said. In fact, companies in the survey were also optimistic about output growth in the short-run.
India's economy is estimated to have grown by a decade low of five % in 2012-13. The actual data will come by this month-end. The government has pegged economic growth this financial year at 6.1-6.7 %.
Service providers mentioned extreme (hot) weather and challenging market conditions as the reasons for easing growth. Subsequently, incoming new work across the private sector expanded moderately at the slowest pace in 17 months.
HSBC chief economist Leif Eskesen said activity in the service sector decelerated further in April led by slower growth in new business. "This led to a slowdown in employment growth and allowed businesses to better keep pace with their order books."
However, inflation pressures eased further, which has allowed the RBI to focus more on growth risks.
