Services sector propels India's economic activity

Services sector expansion propelled the overall economic activity in India during October, a key macro data showed on Wednesday.

The Nikkei India composite PMI (purchasing managers' index) which is a key macro data that indicates monthly trends in overall economic activity showed a rise of 52.6 in October from 51.5 in September.

An index reading of above 50 indicates an overall increase in the economic activity, below 50 an overall decrease.

The composite PMI weighs the average of the manufacturing output index and the services business activity index. It is based on original survey data collected from around 700 companies spread across sectors in India.

According to the composite PMI report published by the leading global diversified provider of financial information services -- "Markit", the October expansion trend was the joint-fastest since March.

The survey said the latest improvement was driven by services, as goods producers saw growth of production wane.

"India's economic growth shifted into a higher gear in October, driven by the service sector. Although manufacturing production continued to expand, growth eased and was sluggish by historical standards," said Pollyanna De Lima, economist with Markit.

On a standalone basis, the Nikkei India manufacturing PMI recorded a 22-month low in October at 50.7, down from 51.2 in September and from 52.3 in August.

The Nikkei services business activity index for India for October stood at 53.2 from September's 51.3.

The services index noted growth in three out of the six surveyed categories, led by post and telecommunication.

The survey also revealed a quicker increase in new business inflows since February.

"The upward trend in private sector output reflected stronger inflows of incoming new work, one that was the most marked since March," De Lima said.

"Services companies saw a faster rise in new business than their manufacturing counterparts, with data implying that price discounts supported growth of new projects."

The services PMI disclosed that the demand conditions also improved in October.

On the input prices, the survey pointed-out a slight rise in petrol and food costs for the services sector. The purchase prices for manufacturers rose for the first time in three months.

Notwithstanding the rise in input costs, service sector employment levels was remained unchanged with approximately 98 percent of survey members reported no change in payroll numbers since the preceding month.

However, goods producers signalled higher staffing numbers, but the rate of job creation was only marginal.

The report cited that the services companies lowered their selling prices for the second successive month in October to improve competitiveness.

The reduction in selling prices at services firms offset higher charges at goods producers, the study said.

"Private sector firms remained wary of costs and left payroll numbers, once again, unchanged. Average input prices rose in both the service and manufacturing sectors, although at rates that were relatively weak," De Lima added.

The survey added that the services business sentiment regarding the 12-

month outlook for activity remained positive in October, which was the strongest since July.

The strongest levels of confidence were seen in the 'other services' and 'hotels & restaurants' categories.