Downturn in India’s service sector activity eases in January

The slowdown in India’s service sector activity eased in January, with the deceleration reflecting a softer contraction in the new business inflows. The seasonally adjusted headline Nikkei India Services Business Activity Index rose to 48.7 in January from 46.8 in December. The index indicates towards the slowest decline in output in the current three-month sequence of reduction.

Panellists commented on ongoing reduction in new work. However, certain companies showed that market conditions rebounded after the close of the window for exchanging high-value rupee notes, noted Markit. The seasonally adjusted Nikkei India Composite PMI Output Index rose to 49.4 in January from the 38-month low of 47.6 in December. This indicates to a deceleration in contraction in private sector activity that was just marginal. A recovery in factory production underpinned the deceleration.

New orders at services companies dropped at a weaker pace in January. Nearly 11 percent of panellists recorded falling levels of incoming new business that they commonly attributed with a comparatively lower amount of cash in circulation. On the contrary, factory orders increased in January. The data underlined a rising extent of pressure on the capacity of private sector companies’ operations as outstanding business rose to a larger degree than in December.

Meanwhile, employment in the service sector rose marginally in the month. The index stayed close to the 50.00 no-change mark, thus continuing a trend of widely stagnant workforce numbers that stretches back to the end of 2015.

Confidence amongst services firms rebounded significantly in January on the back of expectations that market conditions would normalise soon. Around 17 percent of respondents expect increased activity levels at their units in the coming 12 months, whereas the remaining companies anticipate no change.