Services activity slump moderates in Feb; orders fall
Bangalore (Reuters) - The contraction in India's services sector moderated last month but new business declined and input prices rose, a business survey showed on Wednesday.
The HSBC Services Purchasing Managers' Index (PMI), compiled by Markit, rose to 48.8 in February from 48.3, but remained stuck below the 50 mark that separates growth from contraction for the eighth month.
India's services sector accounts for about 60 percent of gross domestic product. The weak PMI follows lower-than-expected GDP growth of 4.7 percent at the end of 2013, suggesting there may be worse to come for the economy as India heads into an election due by May.
"The PMI reading remains below the water line and points to weak growth conditions," said Leif Eskesen, chief economist for India & ASEAN at survey sponsor HSBC.
Indeed, hiring remained muted and all 22 economists polled by Reuters last week said they don't expect any substantial improvement in investment before the general election.
As new business orders shrank for an eighth month firms focused on completing existing work and barely increased headcount - the employment sub-index slipped to 50.1 from 50.9.
But firms did pass on higher costs to clients, suggesting consumer price inflation, which was at 8.79 percent in January, could rise further.
The Reserve Bank of India (RBI) has unofficially started targeting consumer prices to frame its policy and signs of faster rises will pressure the central bank to hike rates again.
However, at its January policy meeting, the RBI said if inflation eases as projected, it does not expect further tightening of policy in the near-term.
But HSBC's Eskesen said risks to inflation remain: "Despite the weak growth backdrop, the RBI will have to keep its inflation guards up to address lingering inflation pressures."
(Reporting by Anu Bararia; Editing by Eric Meijer)
- Tweet this
- Share this
- Digg this
- Wal-Mart and allies in face-off with Apple Pay over mobile payments
- Hundreds of Iraqi tribesmen opposed to Islamic State found in mass graves
- India's universal healthcare rollout to cost $26 billion
- PM Modi boots officials out of the first class cabin
- Sensex, Nifty hit record highs, shrug off Fed's hawkish tone
India's universal health plan that aims to offer guaranteed benefits to a sixth of the world's population will cost an estimated 1.6 trillion rupees ($26 billion) over the next four years, a senior health ministry official said. Full Article