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Service activity moves towards recovery, September PMI at 49.8

IBEF:  October 07, 2020

In September, India's service sector performance generally stabilised amid relaxation in the Covid-19 constraints, a private survey showed on Tuesday, even though service jobs decreased for the seventh month in a row and at a faster pace than in August.

In September, the Services Sector Activity Index rose to 49.8 from 41.8 in August for the fifth straight month. A reading above 50 shows growth, while less than 50 signals contraction.

As per the survey, for the first time since April, though participants were positive about the year-ahead outlook for business activity, there were further declines in new work and jobs.

However, incoming new business dropped moderately, and since March, at the slowest pace. Meanwhile, production costs increased at a faster pace, while the rate of charge inflation was largely comparable to August.

Ms Pollyanna De Lima, Economics Associate Director at IHS Markit, said, "The relaxation of lockdown rules in India helped the service sector shift towards a recovery in September."

Several companies stated, as per the survey report, that attempts to take on additional workers were hindered by a lack of available labour.

Ms De Lima said, “Backlogs data suggest that hiring efforts will continue in the near term, however, so we could see a better employment trend in coming months provided that people are willing to leave their hometown in search for vacancies”.

Companies were positive about the year-ahead outlook for business operations, in line with expectations that a vaccine for Covid-19 would be rolled out. September marked the first month since April in which service providers had faith in the prospects for growth.

Last week, a sister survey showed India 's Purchasing Managers ' Index (PMI) rising in September to the highest in eight and a half years.

The Composite * PMI Performance Index increased from 46.0 in August to 54.6, indicating a marked rate of growth in operation across the private sector economy.

Ms De Lima stated that a better image of the Indian economy is painted, considering the success of the manufacturing industry.' During September, private sector production grew for the first time in six months, and at an above-trend pace, while the sales rise was the first since February.

In the case of product manufacturers and service providers, the pattern for jobs was similar, with businesses in both sectors linking a further reduction in headcounts to labour shortages.

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