India services output growth weakens in June
Other | Photo Credit: Reuters

India's services sector output grew in June at the second-weakest pace in 12 months as new business inflows slowed, a private survey showed on Tuesday. 

The Nikkei Services Business Activity Index, which maps the services sector activity, fell to 50.3 in June from 51.0 in May, according to data compiled by Markit. A reading above 50 indicates expansion.

The weak growth in services output comes after Markit said last week that India's factory activity grew at its fastest pace in three months in June thanks to a stronger increase in new business inflows, a private survey showed. The seasonally adjusted Nikkei India Manufacturing Purchasing Managers’ Index rose to 51.7 in June from May’s 50.7, Markit said.

This pushed the overall private-sector output growth higher during the month. The Nikkei India Composite PMI Output Index, which maps both manufacturing and services sectors, rose to 51.1 in June from 50.9 in May.

"The Indian service sector saw a further cooling of growth momentum in June, the third in consecutive months... Moreover, future expectations dipped to the lowest since February, highlighting concerns regarding the sustainability of the economic upturn," said Pollyanna De Lima, economist at Markit. 

"Although manufacturing shifted into a higher gear in June, variables such as new orders, employment and production stayed below their respective long-run averages," she added.

The Markit survey also showed that the confidence of service providers slipped to a four-month low in June while input prices rose for the ninth consecutive month.

The PMI data highlight the challenges authorities face in sustaining high growth. India's economic growth for the January-March quarter accelerated to 7.9%, pushing the pace of expansion for the full year 2015-16 to a five-year high of 7.6%.

The Reserve Bank of India has lowered interest rates by 150 basis points since January 2015, including a 25-basis-point reduction at its monetary policy review in April. The RBI stood pat on interest rates at the last policy review in June citing inflation risks. 

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