India's services sector grew at its fastest pace in 19 months in January as new business orders saw a sharp surge, helping the economy to shift to a "higher gear", a a monthly survey showed today.
The Nikkei Business Activity index climbed to a 19-month high of 54.3 last month from 53.6 in December, pointing to a marked expansion of activity across the services sector.
The overall increase in services output was mainly driven by the seventh successive monthly expansion of new business orders.
"The services sector gained traction and posted its strongest monthly gain in activity for over one-and-a-half years," said Pollyanna De Lima, economist at Markit, which compiles the survey.
The Nikkei India Composite PMI Output index, which maps both manufacturing and services sectors, also climbed from 51.6 in December to an 11-month high of 53.3 in January.
"The Indian economy shifted into a higher gear in January, supported by a quick rebound in manufacturing production following last month's (Chennai) floods," Lima added.
Lima further said that a strong upturn in new business is a positive note from January's survey, underpinning hopes for further growth of activity across the country's private sector in the near-term.
The survey respondents were also bullish about the output growth. Amid forecasts of further improvements in demand and favourable government policies, service providers in India expect output to continue to increase over the course of the next year.
"This upswing in demand may boost the labour market and help end the long run of subdued employment trends," Lima added.
During January, higher workloads encouraged service providers to hire additional staff in January, following a stagnation in the prior month. Manufacturing jobs also rose at a marginal rate.
The improvement in services and manufacturing sector also underlined the case for RBI keeping the interest rates low.
Reserve Bank Governor Raghuram Rajan yesterday left the key interest rate unchanged citing inflation risks and growth concerns, while pegging further easing of monetary policy on government's budget proposals.
Rajan said RBI "continues to be accommodative" but would look forward to the government's budget proposals on February 29 as also the inflation trend.
According to official figures, WPI as well as retail inflation has been on a rising trend. In December, WPI-based inflation stood at (-)0.73 per cent, while retail inflation moved up to 5.61 per cent.
