Skip to main content

Services sector growth improves in December

By
Services sector growth improves in December
Combined services, manufacturing PMI fastest since demonetisation.India´s economy has a reason to cheer in the New Year with its biggest sector —services —rebounding to growth in December from contraction in November, though the expansion is moderate, according to a widely tracked Nikkei Purchasing Managers´ Index (PMI).
With manufacturing sector posting five year high growth in December, the combined expansion in the two sectors was the fastest since October 2016, the month of demonetisation.Higher activities in services led to increased hiring by firms with jobs growth quickening to the fastest since September, the PMI survey of 400 private sector firms showed.
However, effects of the goods and services tax (GST) still persist, since a large chunk of the improvement in PMI account delayed payments from previous months, and cash shortage still not abated.PMI for services grew from 48.5 in November to 50.9 in December.
APMI above 50 represents expansion or growth, while that below 50 indicates contraction.A coimprovement in both the sectors bodes well for the Advance Estimate of gross domestic product in the current financial year (FY18), wherein the Narendra Modi government saw the lowest growth in its tenure at 5.7 per cent in July-September 2017 in its over three years of rule.
“Latest PMI data indicate better growth in the second half of FY18, when it is viewed along with improved exports and core sector growth in the month of November,” Dharmakirti Joshi, chief economist at CRISIL,a rating agency, told.Business Standard.December 2017 is the first time since demonetisation that manufacturing and services have shown a simultaneous expansion which was neither due to immediate recovery effect post demonetisation or the GST implementation.
Business activity in the services sector, which dealt with two major blows of contraction —one after demonetisation and other after GST implementation —had shown a dip in November 2017, too, (see chart), indicating a sustained impact on services post GST, especially in the information technology/ information techenabled services (IT/ITeS)domain.
The uptick in December PMI for services was held by information and communications, finance and insurance subsectors.But the GST still continues to “weigh on underlying sales volumes” resulting in decline in new contracts,areport by the IHS Markit,a compiler of PMI, said.
Aashna Dodhia, author of the December report and an economist at Markit, terms the December improvement as a marginal expansion.“India´s service economy remained onaweak growth trajectory amid reports that the GST was still hindering efforts to secure new clients,” she added.
While expansion in services was marginal, that in manufacturing was best in the past five years, indicating stronger demand from domestic and global market, says the report.But this five year peak comes with a caveat: Most of the robust improvement has been contributed by transactions that represent delayed payments from previous months.
The Business Standard, New Delhi, 5th January 2018

Comments

Post a Comment

Popular posts from this blog

Household debt up, but India still lags emerging-market economies: RBI

By
  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...
Post a Comment
Read more

External spillovers likely to hit India's financial system: RBI report

By
  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...
Post a Comment
Read more

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

By
  New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...
Post a Comment
Read more