India’s Services PMI Eases But Remains In Expansion Zone

A gauge of India’s services sector eased for the second straight month but remained in expansion zone.

The India Services Business Activity Index, compiled by IHS Markit, stood at 52.3 in December compared with 53.7 in November, according to a media statement. A reading above 50 indicates expansion in business activity.

The Composite PMI Output Index, however, fell to 54.9 in December compared to 56.3 in November.

Companies indicated that growth was supported by securing of new work, but was curbed by competitive pressures and continuing negative impact of the pandemic on demand. While firms were able to procure new work because of marketing efforts, growth eased to the slowest in three months.

Outstanding business increased but was the weakest since June.

New export business decreased sharply but at the slowest pace since March, according to the release. Global Covid-19 restrictions, particularly travel bans, reportedly restricted international demand for Indian services at the end of 2020, it said.

Input costs increased to the highest since February, the release said. The survey participants reported higher prices for a number of items, including cleaning products and fuel. Despite the intensification of cost inflationary pressures, there was a renewed reduction in prices. Those companies that offered discounts mentioned attempts to beat the competition and stimulate demand.

Job shedding resumed in December, with some firms mentioning that liquidity problems, labour shortages and subdued demand caused the latest fall in employment. Payroll numbers declined in nine out of the 10 months.

While companies maintained an upbeat view that output will increase in 2021, the overall level of positive sentiment fell from November. Uncertainty surrounding the pandemic, rupee depreciation and inflationary pressures curbed sentiment.