Service sector growth extends into new year: IHS Markit

The Indian service sector continued to expand in January with growth of new work and business activity quickening since December, according to the latest IHS Markit Services Purchasing Managers' Index (PMI) released on Wednesday.Moreover, the launch of the coronavirus disease 2019 (Covid-19) vaccine programme boosted optimism towards the 12-month outlook for output. However, employment declined further, while exports contracted sharply.

On the price front, there was a slower rise in input costs and prices charged for the provision of services decreased again.

The seasonally adjusted India Services Business Activity Index rose from 52.3 in December to 52.8 in January, pointing to a quicker expansion in output. Still, the headline figure remained below its long-run average of 53.3 and was consistent with a moderate pace of growth.

Compes that reported higher business activity commented on greater client numbers and improved demand conditions.

New business rose in January, marking a four-month period of expansion. The pace of growth was moderate, but accelerated from December. According to panelists, marketing efforts, the reopening of some establishments and strengthening demand all supported the increase in sales.

Underlying data indicated that the rise in new business was centred on the domestic market as new export work decreased further. The pace of contraction remained sharp despite easing to the slowest since last March.

Survey participants indicated that travel restrictions and the Covid-19 pandemic dampened international demand for services.

Looking ahead, service providers were confident of a rise in output in the coming 12 months. Positive sentiment was supported by beliefs that the roll-out of Covid-19 vaccines would underpin demand growth and improvements in the wider economy. The overall degree of optimism was at an 11-month high.

"When we combine the results for the service sector with those for manufacturing, the picture for the Indian economy looks brighter," said Pollyanna De Lima, Economics Associate Director at IHS Markit.

"Across the private sector, output and new orders rose markedly and at rates that surpassed their respective long-run averages," she said.

The IHS Markit India Services PMI is compiled from responses to questionnaires sent to a panel of around 400 service sector compes. The sectors covered include consumer (excluding retail), transport, information, communication, finance, insurance, real estate and business services.

The panel is stratified by detailed sector and company workforce size based on contributions to GDP.

IHS Markit is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government.

( With inputs from ANI )