India’s Services PMI Remains Steady In January
Employees wear protective masks while working work at a reception area of the Motherson Group head office in Noida. (Photographer: Prashanth Vishwanathan/Bloomberg)

India’s Services PMI Remains Steady In January

A gauge of India’s services sector remained steady in January, helped by new businesses.

The India Services Business Activity Index, compiled by IHS Markit, stood at 52.8 in January 2021 compared with 52.3 in December, according to a media statement. A reading above 50 indicates expansion in business activity. The index, however, remains below its long-run average of 53.3.

The Composite PMI Output Index rose to 55.8 in January from 54.9 in December.

New businesses expanded for the fourth month in a row. While the pace of growth was moderate, it accelerated from December, the statement said.

The rise in new business was continued to be driven by the domestic market even as new export work dropped further. The pace of contraction remained sharp despite easing to the slowest since March, the survey said. That was likely because of continuing travel restrictions and dampened international demand for services.

Growth of total new orders was helped by ongoing price discounting strategies. Marketing efforts, the reopening of some establishments and strengthening demand all supported the increase in sales.

Input costs increased for the seventh straight month, with monitored companies reporting higher prices for fuel and a wide range of materials, the statement said. Firms signaled mild capacity pressures in January. Outstanding business rose for the eighth month in a row but at the slowest rate since mid-2020.

Employment, however, remained a sore point. There were back-to-back declines in services sector employment, but the pace of job shedding was marginal and unchanged from December.

The main area of concern is the extent to which costs are rising across the services economy, with the rate of inflation remaining above trend despite easing from December. There are signs that higher costs are preventing firms from taking on additional staff, with the PMI survey showing a second successive fall in employment.  
Pollyanna De Lima, Economics Associate Director, IHS Markit  

Still, service providers remained upbeat and confident of a rise in output in the coming 12 months. The positive sentiment was supported by beliefs that the rollout of Covid-19 vaccines would underpin demand growth and improvements in the wider economy. The overall degree of optimism was at an 11-month high.

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