Services sectors activity in India, declines first time in a year: HSBC reports

The Dollar Business Bureau

The service sector activity of India experienced a plunge for the first times in the last 13 months, as per the HSBC survey report. The reason being the decline of new order flows amid competitive pressure and natural disasters. The HSBC India service activity index, which tracks the changes in the activity of the service companies, fell to 49.6 in May from 52.4 in April since the output prices in the private sector rose further, with the rate of inflation being the strongest in the last 13 months. The reports also stated that competitive outflows and the natural disaster, resulting in decline of the new business inflows, which surged for the first time since April. The index hit a crucial low of 50 marks, which separates the growth from the contraction, for the first time in 13 months. "Restrained demand accompanied by sweltering heat and the earthquake led to falling new work. Nonetheless, the sector is expected to see a rebound in coming months as these factors fade away," Markit Economist Pollyanna De Lima said. Meanwhile, the seasonally adjusted HSBC India Composite PMI Output Index, which depicts both manufacturing and service sectors fell to a 7 month low of 51.2 in May from 52.5 in April. "Disappointing May PMI data for India services indicated that the sector fell back into contraction after experiencing growth for six successive months," added Lima. However, HSBC noted that prospects of the private sector output may revive in the coming future. “An upturn in employment combined with improved business confidence further add to the evidence that prospects may brighten,” Lima added. The optimism of the service providers was maintained in May promising better marketing strategies and economies conditions which are expected to lead to better business activity over the next year. The Indian service companies took a bold step by hiring additional workers in May resolute of the weaker demand. However job creation was only optional, as the large majority of the survey participants warned the unchanged levels of staffing.  

June 03, 2015 | 06:41 pm IST.