A man holding an umbrella shelters a worker from the rain as he welds repairs to a truck at a freight depot near Nhava Sheva Port in Navi Mumbai. (Photographer: Adeel Halim/Bloomberg)

India Services Sector Activity Cools Ahead of RBI Rate Decision

(Bloomberg) -- Activity in India’s dominant services sector cooled in January, adding to the urgency for the central bank to do more to support the economy as it meets on interest rates.

The seasonally adjusted Nikkei India Services Business Activity Index fell for the second straight month in January to 52.2 from 53.2 in December, indicating a softer expansion in output. It was the lowest reading since October 2018, with business expectations also declining in January from a month earlier.

The report highlighted waning domestic demand, and underpins expectations of an interest rate cut by the Monetary Policy Committee that’s due to announce its decision Feb. 7. With inflation at an 18-month low, cooling demand and mounting global risks the Reserve Bank of India has reasons to abandon its hawkish bias. Still, the government’s expansionary budget last week is bound to present a challenge for Governor Shaktikanta Das.

India Services Sector Activity Cools Ahead of RBI Rate Decision

“There is some sign that growth may run out of steam, in the short-term at least,” said Pollyanna De Lima, principal economist at IHS Markit and author of the survey.

Nevertheless, an acceleration in manufacturing output offset the slowdown in services activity growth. The seasonally adjusted Nikkei India Composite PMI Output Index was at 53.6 in January, unchanged from December. A reading above 50 signals expansion.

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