Healthy demand in June accelerates growth of India's service sector: PMI

Healthy rise in new businesses accelerated the growth of India's service sector in June, a key economic data point showed on Wednesday.

Accordingly, the seasonally adjusted Nikkei India Services Business Activity Index rose at the fastest pace since last June, despite the input cost inflation at overall high level.

The index rose from 49.6 in May to 52.6 in June. An index reading of above 50 indicates an overall increase in economic activity and below 50 an overall decrease.

"The service economy returned to expansion territory in June. Encouragingly, the latest performance was the strongest seen in a year, against a backdrop of improving demand conditions, as evidenced by the fastest gain in new business since last June," Aashna Dodhia, Economist at IHS Markit, and author of the report, was quoted as saying in a statement.

Consequently, the seasonally adjusted Nikkei India Composite PMI Output Index rose from 50.4 in May to 53.3 in June, supported by output growth in both the manufacturing and service sectors.

As per the report, the latest reading was the strongest seen since October 2016 and indicative of a solid rate of expansion.

"The PMI data signalled the best improvement in the overall health of the economy since October 2016, propelled by solid growth in both the manufacturing and service economies, with the sharper rise in the former," Dodhia said.

"However, overall input costs rose at the strongest rate since July 2014, and amid a weak rupee and higher oil prices, inflation may remain elevated. Given these circumstances, the chances of further monetary policy tightening have heightened."

--IANS

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