Business Activity Rises for 2nd Straight Month; Employment Up for First Time in 9 Months

The Indian services sector rebound was extended in November as new work orders assisted growth in business activity and the jobs increase in nine months, a monthly survey said on Thursday.

For the second month in a row in November, the seasonally adjusted India Services Business Activity Index posted above the crucial 50 mark that separates growth from contraction.

Ms. Pollyanna De Lima, Economics Associate Director at IHS Markit said, “From March to September, the Indian service sector continued to recover from coronavirus-induced contractions. Companies have seen a further increase in new job intakes and have responded to this by increasing business activity and jobs.”

In November, service companies recruited additional staff, completing an eight-month round of job shedding. That said, as some businesses reported having enough workers to cope with current workloads, the rate of job growth was marginal overall.

Inflation rates for production expenses and output charges have increased. Enabling factors for domestic demand are low interest rates aimed at mitigating the negative effects of COVID-19 on the economy and the recent increase in jobs in services.

Meanwhile on Wednesday, the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) began its three-day deliberation in the middle of expectations of the status quo on benchmark lending rates in light of high retail inflation. On December 4, the RBI will announce its monetary policy review.

Looking ahead, service providers have been optimistic in the coming 12 months of an improvement in market activity. The cumulative degree of optimism improved to a peak of nine months.

Meanwhile, investment in the Indian private sector increased in November for the third straight month, but the rate of growth eased from a near nine-year high in October. The Composite PMI Performance Index, calculating the combined services and output of manufacturing, dropped from 58 in October to 56.3 in November. Slower rises in sales were posted by both product manufacturers and services companies.

Ms. Lima said, “Production and revenues in the private sector have held up well, although there have been some signs of growth among goods producers and service providers losing momentum.”

As a pick-up in manufacturing helped the gross domestic product (GDP) register a lower contraction of 7.5%, India’s economy recovered faster than anticipated in the September quarter and held out hopes for more progress on the bouncing back of consumer demand.

As the coronavirus lockout pummelled economic activity, GDP contracted by a record 23.9% in the first quarter of fiscal 2020-21 (April 2020 to March 2021).

Source: IBEF