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In November, services activity grows at fastest pace in 5 months

Activity in India’s services sector expanded at its fastest rate in five months in November on new order flows, but hiring declined for the first time in four months, showed the widely-tracked HSBC purchasing managers’ index (PMI) data released on Wednesday.

The index rose to 52.6 points in November against 50 in the previous month.  A reading at 50 separates expansion (above 50) and contraction (below 50).  

Hiring in the sector registered a fall and sentiments remained subdued. Besides, the reading was below the series average. 

Growth in services sector activity had little impact on employment in November, as workforce numbers in the sector declined for the first  time in four months, said Markit  Economics, which compiles the PMI data. 

Also, new business sentiment slipped to the weakest since mid-2007. This implied that continued reforms are needed to sustain the uptick in the growth.

“Service sector activity grew in November, as new business rose for the seventh month running. Despite the uptick in order flows, business sentiment deteriorated, reminding us that continued policy action that addresses investor concerns is needed to sustain growth momentum,” said Pranjul Bhandari , Chief India Economist at HSBC.

Services rose 7.05% in the second quarter of the current financial year against 6.80% in the first three months. Even then, India’s gross  domestic  product declined to 5.3% against 5.7% over this period, as industry, particularly manufacturing, did not pick up.

For November, PMI manufacturing rose to a 21-month high of 53.3 points, showed the data released earlier this week. This combined with PMI services, saw the Composite PMI Output Index hit a five-month high of 53.6 in November, up from 51.0 in October.  

Post & Telecommunications was the best performing segment of the services sector, while contraction was seen in Financial Intermediation and Hotels & Restaurants.

Business activity was driven higher by faster growth of new business in November. The new business sub-index accelerated to 52.5 in November, its highest since July. 

Meanwhile, input costs fell for the first time since March 2009. The rate at which input prices decreased was the second quickest in the  survey’s nine-year history, albeit moderate overall.

Despite manufacturers reporting stronger inflationary pressures, the rate of cost inflation in the private sector overall eased to the weakest in the current 68-month sequence of rising prices.

Subsequently, prices charged by Indian services firms deteriorated for the first time in more than four years in November. That said, the pace at which selling prices fell was fractional overall.

A faster rise at goods producers did not prevent the rate of private sector output inflation from easing to the joint-slowest in more than four years.

Bhandari, who had  advised RBI on Monday to exercise caution in easing monetary stance due to price  pressures on the  manufacturing side, did not offer any suggestion this time.

RBI refrained from easing its stance  at its  policy on Tuesday,  but hinted  that it may do  so next  year depending on price  pressures. 

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