India's services sector grows for the first time in seven months as COVID-19 restrictions ease

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India's services sector grows for the first time in seven months as COVID-19 restrictions ease
Representative imageBCCL
Indian service sector activity ended the seven-month sequence of decline and registered growth in October, supported by improved market conditions amid easing COVID-19 restrictions, a monthly survey said on Wednesday. At 54.1 in October, up from 49.8 in September, the seasonally adjusted India Services Business Activity Index posted above the 50.0 no-change mark for the first time since February.

A print above 50 means expansion and a score below that denotes contraction, as per the IHS Markit India Services Purchasing Managers' Index (PMI).

"It's encouraging to see the Indian service sector joining its manufacturing counterpart and posting a recovery in economic conditions from the steep deteriorations caused by the COVID-19 pandemic earlier in the year," said Pollyanna De Lima, Economics Associate Director at IHS Markit.

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Lima further noted that "while a revival of the manufacturing industry began in August, only now the service sector started to heal. Service providers signalled solid expansions in new work and business activity during October".

Services companies reported an increase in new work intakes, which they attributed to successful marketing efforts and strengthening demand.

On the job front, there was another monthly decline in employment. The pace of job shedding was solid and matched that recorded in September. Furthermore, payroll numbers contracted across the five monitored sub-sectors.

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"Survey participants indicated that workers on leave had not returned and that a widespread fear of COVID-19 contamination continued to restrict staff supply," Lima said.

Meanwhile, hopes that a vaccine for COVID-19 will be rolled out underpinned positive sentiment toward the 12-month outlook for business activity, the survey said.

On the price front, the rate of input cost inflation picked up to an eight-month high, but there was a softer rise in prices charged for the provision of services.

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The Composite PMI Output Index, which measures combined services and manufacturing output, rose from 54.6 in September to 58.0 in October, signalling the strongest increase in private sector output in close to nine years.

Companies in the manufacturing and service sectors recorded lower payroll numbers at the start of the third quarter of fiscal year 2020/21. As a result, private-sector employment declined for the eighth straight month, the survey said. DRR BAL
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