Seven-year High Growth in Indian Service Sector with rising PMI

CIOReviewIndia Team | Wednesday, 04 March 2020, 07:27 IST


India’s service sector today is growing at an outstanding rate that hasn’t been seen for over seven years (highest reading since 2013). The Nikkei/IHS Markit Services Purchasing Managers’ Index has risen from 55.5 in January to 57.5 last month. Also, it is comfortably above the 50-mark separating growth from contraction for a fourth month.  

This acceleration in service sector has boosted recovery in foreign demand and has helped in mustering needed business confidence. According to the statement of Pollyanna De Lima, principal economist at IHS Markit in the release, "Behind the resilience in the trend for business activity stands healthy demand for services from both the domestic and international markets."

"Positive gains in new work across the manufacturing and service sectors suggest that private sector output will likely increase markedly again in March, boding well for final quarter GDP following expectations of a flat growth rate in Q3 FY 2019/20," he added.

Although release has showed a slightly slowing down in expansion of the sub-index tracking new businesses in January, but it remains above the long-term average if compared to the index published in December 2005.    

Moreover, contracting for the first time in 11 months, new export business is gradually expanding since January. "Service providers experienced a marked improvement in workforce productivity, with the sharp rise in business activity happening despite a softer and only modest increase in employment," highlighted de Lima.

Furthermore, due to a modest weakening in demand and output, a sister survey has also showed that the growth in factory activity has slowed in February as compared to the starting of the 2020. While, rising from 56.3 in January, the composite PMI including both manufacturing and services has grown to 57.6 in February.

Strengthening the expectation index to a six month high, service providers are very much confident about the growth in the year ahead. The survey showed the retail inflation will further bring significant growth in the market even if the growth in both input costs and prices charged went slightly low in February.

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