NEW DELHI: India’s services sector activity has expanded at the fastest rate in a year during February.
This is the fifth straight month of expansion for the sector which is the largest contributor to the GDP with around 55 per cent.
However, this did not translate into good news on the employment front as companies continued to cut jobs to save cost.
According to the latest reading of Purchasing Managers’ Index (PMI), the seasonally adjusted services business activity rose from 52.8 in January to 55.3 in February, pointing to the sharpest rate of expansion in output in a year amid improved demand and more favourable market conditions, said the economic research agency IHS Markit. In PMI parlance, a reading above 50 indicates expansion, while sub-50 signals contraction.
The Composite PMI Output Index, which measures combined services and manufacturing output, went up from 55.8 in January to 57.3.
“Economic activity is generally expected to recover in the final quarter of fiscal year 2020/21 after coming out of technical recession in Q3, and the latest improvement in the PMI indicators points to a strong expansion in the fourth quarter, should growth momentum be sustained in March,” Pollyanna De Lima, Economics Associate Director at IHS Markit said in a statement.
Transport & storage was the best-performing segment of the service sector out of the five categories monitored by the survey.
The companies recorded the sharpest rise in overall expenses in eight years, it noted. As a result, there were further job losses across both the manufacturing and service sectors, which also could restrict domestic consumption in the coming months and companies noted the sharpest rise in total expenses.
A number of companies suggested that the Covid-19 restricted labour supply and the pace of job losses accelerated from January.
“However, with capacity pressures mounting, business sentiment strengthening and the vaccination programme widening, it seems that the best days are ahead of us regarding employment growth,” stated Lima.
New export orders declined for the twelfth month running, albeit at the weakest rate since last March.
On the prices front, amid reports of higher freight, fuel and retail prices, input costs increased across the private sector to the greatest extent since February 2013.
Competitive pressures and efforts to secure new work, however, prevented companies from lifting own fees.