Services sector improves further on new business orders: PMI

New Delhi: Activity in India's services sector improved further in August on the back of fastest rise in new orders in five months, a private survey showed, but businesses were less optimistic going ahead.

The Nikkei India Services Business Activity Index rose to 51.8 from 50.8 in July, indicating rising growth. A reading above 50 on this surveybased index shows expansion.

"Economic growth across India was boosted by improvements in the service sector. While increases in activity and new business across the sector accelerated in August, moderations in growth rates were noted at goods producers," said Pollyanna De Lima, economist at Markit, which compiles the survey. The pickup in services boosted the Nikkei India Composite PMI Output Index, which captures output in both services and manufacturing. The composite index rose to a five-month high of 52.6 from 52.0 in July.

The upbeat data comes following disappointing set of macro numbers that showed the economy grew 7 per cent in April-June quarter, below expectation and the 7.5 per cent growth recorded in the previous quarter.

Core sector growth slowed to 1.1 per cent in July and auto sales were below expectation in August. The data has triggered call for further reduction in interest rates.

"With growth remaining relatively weak and survey evidence pointing to a lack of inflationary pressures across the country, further rate cuts are on the cards," De Lima said.

Reserve Bank of India Governor Raghuram Rajan had left the benchmark lending rate (repo rate) unchanged at 7.25 per cent in the last monetary policy review on August 4. The next review is due on September 29.

Chief economic advisor Arvind Subramanian had on Wednesday said deflation was a bigger worry for the economy going ahead.

The survey said higher demand coupled with capacity improvements and increased marketing had contributed to the latest expansion in new business. The survey showed both manufacturers and service providers left payroll numbers unchanged in August, with significant job creation not seen since early 2014. "While the path ahead for the economy looks unclear, firms' reluctance to hire persists," Lima added.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.