Indian services sector returns to marginal growth, PMI at 50.9 for December

The Indian services sector returned to marginal growth in December as new orders broadly stabilised, says a monthly survey. Even as there was a turnaround, business activity growth in December was slight and remained well below the average recorded for the survey history as a whole.

The seasonally adjusted Business Activity Index improved to 50.9 in December from 48.5 in November, signalling a renewed increase in business activity.

In PMI lexicon, a print above 50 means expansion and a score below that denotes contraction. "India's service economy showed signs of recovery as it returned to marginal expansion in December. That said, it remained on a weak growth trajectory amid reports that the Goods and Services Tax (GST) was still hindering efforts to secure new clients," said Aashna Dodhia, Economist at IHS Markit, and the author of the report.

Meanwhile, production growth at Indian manufacturers quickened to the fastest in five years in December and accordingly, the headline seasonally adjusted Nikkei India Composite PMI Output Index rose from 50.3 in November to 53.0 in December, the highest since October 2016.

"Still, the best overall performance of the economy was recorded since October 2016, endorsing the standpoint that the economy is recovering from the implementation of the twin  shocks of demonetisation and GST," Dodhia said.

In terms of job creation both sectors -- manufacturing and services -- outstripped historical averages signalling a continued revival of the labour market.

On the prices front, GST continued to exert upward pressure on manufacturers' cost burdens in December.
Overall, input cost inflation quickened to the sharpest since April and subsequently, firms raised their average selling prices at the fastest pace in 10 months, the report said.