India’s services output grew to a 19-month high in January as higher demand increased business inflows, a survey showed on Wednesday.
The Nikkei Services Business Activity Index for India rose to 54.3 in January from 53.6 in December, according to data released by financial information services firm Markit.
Output rose in four of the six broad areas of the service economy, with hotels and restaurants and transport and storage being the exceptions.
While a seventh successive monthly expansion in new businesses pushed service activity higher, a concurrent rise in factory activity also helped. Factory output in January rebounded from a 25-month low in December, helping the India composite PMI index climb to an 11-month high of 53.3 last month from 51.6 the month before.
The Nikkei Purchasing Managers’ Index measures the health of a sector based on surveys of private-sector companies. A reading above 50 denotes expansion.
“A strong upturn in new business is an especially positive note from January’s survey, which underpins hopes for further growth of activity across the country’s private sector in the near term,” said Pollyanna De Lima, economist at Markit. “Moreover, this upswing in demand may boost the labour market and help end the long run of subdued employment trends.”
Though PMI indices show growth in business activity, estimates released by the Reserve Bank of India on Tuesday showed little change with the central bank projecting the economy to grow 7.4 per cent this fiscal year.
Though the market is expecting another rate cut from the RBI after the budget to stimulate the economy, the real problem lies in commercial lenders’ reluctance to fully pass on the 125 basis points of reductions that the central bank made last year.