New Delhi: Services activity, which accounts for more than half of India’s $2.7 trillion economy, contracted for the second time in October, though at a slower pace than what was witnessed in the previous month, while job creation moderated, said a private survey indicating that the economic slowdown in Asia’s third largest economy was showing little signs of improvement.
The IHS Markit India Services Business Activity Index signalled a second consecutive decline in output with the reading at 49.2 in October, rising from 48.7 in September, the market information supplier said in a statement. A figure above 50 indicates expansion and below 50 indicates contraction.
According to the statement, concerns that challenging economic conditions will linger dragged business confidence to its lowest level in close to three years, adding that finance and insurance and real estate and business services acted as the main drag on the country’s service economy. Both business activity and sales contracted in October. Consumer Services was the brightest spot, posting strong growth in output and new work.
The market information supplier had said last week that India’s manufacturing output had grown at its slowest pace in two years in October, indicating continued weakness in industrial activity. Official data released last week had shown that output of the seven of the eight infrastructure industries contracted in September.
The October data print indicated that demand weakness was centred on the domestic market, with exporters posting a modest increase in global sales which was the slowest in four months. One factor that restricted job creation was subdued confidence towards the 12-month outlook for business activity.
IHS Markit said India’s private sector activity decreased for the second straight month in October, reflecting a notable slowdown in growth of factory production and a further contraction in services activity. The Composite PMI Output Index fell from 49.8 in September to 49.6, signalling a marginal rate of reduction overall. The slowdown in job creation was widespread across the manufacturing and service sectors.
The government and the Reserve Bank of India have been taking steps to arrest the slowdown. The RBI last month slashed its policy rates for the fifth time this year taking the cumulative reduction so far this year to 135 basis points to support growth. RBI’s repo rate stands at 5.15%. The central bank had also cut its GDP growth estimates to 6.1% for this fiscal, from an earlier estimate of 6.9%.
