Activity in India’s dominant services sector improved for the second straight month in April as employment growth rose at the fastest pace since March 2011.
The Nikkei India Services Purchasing Managers’ Index rose to 51.4 last month -- the highest since January as business conditions gathered pace supported by new order growth, said research firm Markit. The Index stood at 50.3 in March after sliding to 47.8 in February. A reading above 50 indicates economic expansion, while a reading below it signals contraction.
Job creation in the services sector, which contributes about 60 percent to India’s $2.3 trillion economy, accelerated at a sharp pace, reflecting an uptick in the country demand, the research firm statement said.
Greater inflows of new work helped bolster activity, however, the latest upturn was modest and remained weaker than the series trend.IHS Markit Statement
Activity in the manufacturing sector also improved in April, with the Nikkei India Manufacturing PMI rising to 51.6, taking the composite PMI output Index to a three-month high of 51.9.
Cost burden in the service sector rose in April, according to a Markit survey, even as inflationary pressures continued to ease further, hitting the weakest mark since August 2017. “Respondents linked higher raw material cost to increased prices for food and transport to the rise in cost,” the statement added.
The Reserve Bank of India, in its April monetary policy meet flagged off upside risks to inflation, emerging from strengthening aggregate demand, fiscal slippage and global crude oil prices. The MPC expects CPI inflation at 4.7-5.1 percent in the first half of financial year 2019. For the second half, it projected inflation at 4.4 percent.
Confidence in the services sector remains high, with around 23 percent of the IHS Markit survey panel forecasting growth. Degree of optimism also remains strong in the manufacturing sector as business conditions improve following transition into the Goods and Services Tax regime.
As the service economy contributes a greater proportion to real GDP, and continued to be outperformed by its manufacturing counterpart, overall private sector growth was only modest and below the historical trend.Aashna Dodhia, Economist at IHS Markit