Economic slowdown: India’s services sector activity hits lowest level since February 2018

Indias-services-sector

The services sector activity in India fell to its lowest level since February 2018 in September, a monthly survey revealed on October 4. The contraction that happened after a sequence of expansion for 18 months, was caused by poor client demand as the IHS Markit India Services Business Activity Index fell from 52.4 in August to 48.7 in September.

According to companies, the reasons behind the same are economic troubles, unfair pricing and reduced demand conditions.

As per the PMI parlance, a print below 50 denotes contraction while a score above it means expansion.

As per the survey, growth of Indian private sector activity came to a halt in September, ending one-and-a-half-year sequence of expansion.

The Composite PMI Output Index that maps both the manufacturing and services sector fell from 52.6 in August to 49.8 in September, reflecting softer production growth and an outright reduction in services activity.

“Private sector output in India contracted for the first time since February 2018. This reflected a decline in sales, albeit fractional, which restricted employment growth. Worryingly, business sentiment sank to a 31-month low,” said Pollyanna de Lima, Principal Economist at IHS Markit.

Challenging economic conditions hampered business sentiment in September, with optimism down at goods producers and service providers alike. Aggregate confidence fell to a 31-month low.

On the prices front, the survey said the latest results also highlighted subdued inflationary pressures in the sector, with input costs rising at the slowest rate in over two-and-a-half years.

“A drop in aggregate input cost inflation to its lowest in around three years raises the possibility of a further cut in the benchmark interest rate,” Lima said.

Experts believe the Reserve Bank of India is likely to go for yet another rate cut at the fourth bi-monthly monetary policy for 2019-20 on Friday.

The RBI’s Monetary Policy Committee (MPC) is slated to announce its fourth bi-monthly policy decision for this fiscal later in the day.

News Source:- Moneycontrol

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