But, the PMI for manufacturing, another crucial sector, was at a three-month low of 53.2 points in January, down from 54.7 December. Combining both, the HSBC composite PMI posted 56.3 points, the same as that of its reading in December. In November, the index had posted 53.2. The overall rate of expansion was at an eleven-month high.
In the first half of the fiscal year 2012-2013, the rate of growth of the Indian economy was just 5.4 per cent. Many economists expect that the economy will recover in the second half.However, the Industrial growth was at its four-month low in November when it registered a contraction of 0.1 per cent.
The PMI measures the activity of private sector companies in India. It surveys around 350 companies in the services sector, and around 500 companies in the manufacturing field. If the PMI reading is above 50 points, that indicates an expansion in business activity, while a reading under 50 indicates a contraction. In the month of January, the private sector output experienced a sharp rise. The rate of growth in new orders in the services sector was at an 18 month high. The rate of growth of new orders in the private sector was at an 11 month high.
The backlog of work at private sector firms in India rose slightly during January. This was largely due to production growth and the shortage of power, the panelists said.
“Service sector activity continued to pick up pace led by a faster inflow of new business. With increased hiring, the companies broadly managed to contain the rise in backlogs of work.” said Leif Eskesen, chief economist for India and Asean at HSBC.
The overall rate of inflation was in sync with its corresponding figure in the previous month. The Reserve Bank of India (RBI) had cut the repo rate and CRR by 25 basis points in its January 29 monetary policy review. The repo rate cut came after a nine-month wait, after the headline WPI inflation fell to a three year low in 2012 December.
“Inflation readings held broadly steady, with fuel, raw material and labour cost pressures still simmering. These numbers underscore the need for the RBI to approach policy easing with caution.”, Eskesen said.
The private sector employment went up for the eleventh month. There was an increase in the rate of employment in the services sector, although the increase in the rate of employment was slight as it was in December. Even though the input prices went up for the 46th successive month, and the output prices went up for the 44th consecutive month. The volume of the work undertaken by the private sector, too, went up.
With the improving performance of the services sector a faster recovery is likely.
