Services expand for eleventh month

Add to inflationary expectations.

Service, which make up more than half the economy, grew for the 11th straight month, adding to inflation risks.

HSBC Holdings Plc and Markit Economics’ Purchasing Managers’ Index was at 58.1 last month, compared with 60.9 in February, according to an emailed report today.

A reading above 50 indicates expansion. Economists expect Reserve Bank of India Governor D Subbarao to raise benchmark interest rates for the second time in a month in the April 20 monetary policy statement to curb rising prices. The key wholesale price inflation rate climbed to a 16-month high of 9.89 per cent in February.

“Inflation is definitely a clear risk and the Reserve Bank of India has a lot to do to dampen it,” N R Bhanumurthy, an economist at the New Delhi-based National Institute of Public Finance and Policy, said before the report. He said the central bank might raise interest rates by 25 basis points this month.

RBI increased the reverse repo rate by a quarter-point to 3.5 per cent from a record-low 3.25 per cent and the repo rate to 5 per cent on March 19.

“There is a clear upsurge in the economy as indicated by the different indicators,” said Crisil Chief Economist Dharmakirti Joshi. “The central bank has to lift rates more to control prices,” he added.

The gain in services, such as banking and hotels, comes after the Purchasing Managers’ Index for manufacturing rose for the 12th straight month in March. Trade data released on April 1 showed imports rose 66.4 per cent in February, indicating a growing demand in the economy.

Salaries in India may grow at the fastest pace in Asia-Pacific this year, according to Hewitt Associates Inc.