Economy rebounds, but recovery in services tepid
The Nikkei India Services Purchasing Managers’ Index (PMI), at 50.9 in December 2017, is yet another indication that the worst is behind the economy. With the manufacturing PMI on a strong footing, the Nikkei India Composite PMI Output Index, which includes private sector activity in both manufacturing and services, showed a smart rebound to 53, from 50.3 in November. Chart 1 has the details.
Momentum in business activity is not yet back to where it was in October 2016, as Chart 1 shows, but it’s improving. Aashna Dodhia, an economist at IHS Markit, points out that the services sector “remained on a weak growth trajectory amid reports that the Goods and Services Tax (GST) was still hindering efforts to secure new clients”. That is clearly evident from Chart 2, which shows the New Business sub-index of the services sector PMI at 50, which means it neither expanded nor contracted, even though it had contracted in November.
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