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Private sector output nears stagnation

03 December, 2015

India’s private sector output came close to stagnation in November, as a demand slump weighed down on manufacturing and services activity, a survey showed on Thursday.

The Nikkei India Business Activity Index, which measures private sector output, fell to 50.2 as service activity inched to stagnation at 50.1 coming down from an eight-month high of 52.3 in October, according to data released by financial information services firm Markit.

The loss of momentum in services output comes after data showed manufacturing activity in India also slowed in November coming in at a 25-month low.

“Services companies in India displayed a lack of optimism with regards to the 12-month outlook for activity, as sentiment dropped to the lowest in the 10-year survey history. Difficult economic conditions and weak demand reportedly hit confidence,” report said

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The Nikkei Purchasing Managers’ Index measures the health of a sector based on surveys of private sector companies. A reading below 50 denotes contraction.

The data from PMIs are a setback for the government, as it aims to revive demand in the economy. While GDP figures released on Monday showed some acceleration coming in at 7.4 per cent for the second quarter, there were still far away from the 8 per cent target that government had set previously for the economy.

Reserve Bank of India’s last meeting for December on Tuesday was also a non-event with no changes in rates or projections for the economy. With credit growth still in single digits, the government will be banking on the pay hikes it announced following the Seventh Pay Commission’s recommendations to prop up spending again. 

PMI number showing a demand slump is a slippery terrain for the government. It may fall short of the 7.5 per cent target and the revival in manufacturing that was seen in the current GDP may be reversed in the third quarter.

“Gloomy PMI data show a broad-based weakness in output, with little prospect of a rebound apparent in the near term,” said Pollyanna De Lima, economist at Markit.


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Private sector output nears stagnation

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