You are here: Home » Economy & Policy » News
Business Standard

India's services growth slowed to 3-month low in April, input costs soared

Growth in India's dominant services sector eased to three-month low in April but remained unexpectedly resilient even as Covid-19 crisis intensified and cost pressures rose at fastest pace in 9 years

India services sector | India economy


Service sector

Growth in India's dominant services sector eased to a three-month low in April but remained unexpectedly resilient even as the COVID-19 crisis intensified and cost pressures rose at the fastest pace in over nine years, a private survey showed.

The Nikkei/IHS Markit Services Purchasing Managers' Index fell to 54.0 last month from 54.6 in March, its lowest since January but still well above the 50-mark separating growth from contraction and outpacing expectations in a Reuters poll for a fall to 51.1.

"Firms foresee higher output volumes over the course of the coming year, but business sentiment was dampened by concerns surrounding the pandemic," noted Pollyanna De Lima, economics associate director at IHS Markit.

Despite the new business sub-index holding at the same level as in March and business expectations remaining positive, sentiment towards prospects for the year-ahead fell to a six-month low.

That chimed with a Reuters poll last week that found although economic growth forecasts have not yet been much impacted by the record-setting COVID-19 second wave, further downgrades were likely.

India's tally of infections surged past 20 million on Tuesday, boosted by 357,229 new cases over the last 24 hours, while deaths rose 3,449 for a toll of 222,408.

At least 11 states and regions have ordered curbs on movement to stem infections, but Prime Minister Narendra Modi's government, widely criticised for allowing the crisis to spin out of control, is reluctant to announce a national lockdown, concerned about the economic impact.

Adding to pressure on services companies, input costs, which have risen for 10 consecutive months on higher food and fuel prices, rose at the fastest rate since December 2011. The strongest increase was seen in consumer services.

Yet the Reserve Bank of India was not expected to raise interest rates this fiscal year, instead supporting growth as the country grapples with the

"Services firms noted the steepest rise in overall expenses in over nine years as global shortages of inputs and higher transportation costs continued to exert upward pressure on outlays," De Lima added.

"The gap between rates of inflation for input prices and charges was one of the widest since the global financial crisis."

Selling prices rose mildly as very few firms passed on the cost burden to clients, with 98% of respondents leaving fees unchanged to secure orders and remain competitive.

Firms lowered headcount for the fifth consecutive month, albeit slightly. Just 3% of the companies shed jobs.

The new export business sub-index was further below the breakeven mark than in March as travel restrictions added to the fall in international demand which has been on a downtrend since the onset of the pandemic in March 2020.

Manufacturing activity growth picked up slightly in April, but the fall in the services reading pulled the composite PMI down to 55.4 from 56.0 in March.



Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Wed, May 05 2021. 11:05 IST