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India’s Services Activity Contracts To Six-Month Low In February

India’s services activity activity weighed on India’s overall business output in February.

An employee talks through a headset while working at the Avise Techno Solutions LLP call center in Kolkata. (Photograph: Taylor Weidman/Bloomberg)
An employee talks through a headset while working at the Avise Techno Solutions LLP call center in Kolkata. (Photograph: Taylor Weidman/Bloomberg)

India's services activity fell to a six-month low in February, as new work orders declined for the first time in three months.

The Nikkei India Services Purchasing Managers’ Index fell to 47.8 in February from 51.7 in January, according to a statement by Markit. A reading above 50 indicates economic expansion, while a reading below 50 signals contraction.

The fall in services activity was on the back of poor underlying demand conditions and a competitive market, IHS Markit said in a statement. It, however, added the fall is “modest and transitory” in nature.

Firms seem to believe that the decline is transitory as they raised their staffing levels at the joint-fastest pace since June 2011, in line with positive projections of activity growth. 
Aashna Dodhia, Economist, IHS Markit

Dodhia said the growth in manufacturing activity of the country outweighed the decline in services activity. Manufacturing activity in India expanded for a seventh straight month in February.

Meanwhile, India’s composite business activity index fell to 49.7 last month from 52.5 in January, marking an overall contraction in business activity.

Key Highlights

  • Job creation accelerated to its strongest level since June 2011.
  • Service providers remained optimistic towards the 12-month outlook for output.
  • Backlogs of work increased across India’s service sector for the 21st consecutive month in February.
  • In response to increasing input prices, service providers raised their output charges at the fastest pace since July.