NEW DELHI, Aug 5: Services sector returned to growth in July, after two consecutive months of contraction, as new orders witnessed a surge and hiring gathered pace to hit a two-year high rate, a survey showed today.
The Nikkei India Services Business Activity Index, which tracks changes in activity at service companies on a monthly basis, increased to 50.8 in July from 47.7 in June, indicating the first rise in services activity in three months.
A reading below 50 means contraction in the sector.
“While it was welcome news to see a return to growth of activity in the Indian service sector during July, we are still looking at a modest improvement at best,” said Andrew Harker, senior economist at Markit, which compiles the survey, said.
Services activity rose primarily due to a renewed increase in new business orders. This upturn in incoming new work led Indian service providers to take on additional workers in July. Rate of employment rose at the fastest pace in two years but only “slightly”.
“While contrasting with continued marginal job shedding in the manufacturing sector, the rise in services employment was enough to result in higher staffing levels overall,” the survey said.
However, the confidence among Indian services firms deteriorated in July and survey respondents said that there are “concerns surrounding future economic conditions and competitive pressures”.
Upturn was also seen in the seasonally adjusted Nikkei India Composite PMI Output Index, which climbed to 52.0 from 49.2 in June to signal a modest increase in activity.
On prices, the survey said that inflationary pressures remained muted during the month, with companies actually raising their output prices at a slower pace than in June.
“When looking at the manufacturing and service sectors together, weak inflationary pressures and modest growth tend to support a more accommodative monetary policy environment,” Harker said.
After three cuts in seven months, the RBI yesterday decided to keep the benchmark lending (repo) rate unchanged at 7.25 per cent as also the cash reserve ratio (CRR) at 4 per cent.
Reserve Bank Governor Raghuram Rajan, however, indicated that he could go for a rate cut soon if macro-economic data is favourable and monsoon turns out to be good. (PTI)
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