India services growth slows but outlook bullish: HSBC

India services growth slows but outlook bullish: HSBC

Mumbai: Business activity among Indian services companies expanded in November but at a slower pace than in the previous month, with broad growth across all sectors, a survey released on Thursday showed.

The HSBC Markit Business Activity Index, based on a survey of 400 firms, fell to 55.20 in November after having climbed to a 13-month-high of 56.78 in October.

The index has been above 50, which separates expansion from contraction, for seven months as the economy shakes off the impact of the global slowdown. Before that, it shrank for six months, hitting a trough of 40.3 in February.

“As with the manufacturing PMI for November, this was a slightly disappointing release, pointing to a modest easing in the pace of service sector growth from October," said Robert Prior-Wandesforde, senior Asian economist at HSBC.

India’s manufacturing activity expanded for the eighth straight month in November but at its weakest pace since March due to a slowdown in growth of output, new business and employment, a survey showed.

“Taking the manufacturing and services output indices together, the composite output PMI has effectively flattened out over the last few months, having surged earlier this year," Prior-Wandesforde said.

“It points to roughly to 9-10% year-on-year GDP growth outside of agriculture."

The prices charged sub-index dropped to 49.61 in November, contracting after six months of expansion, indicating service firms actually trimmed prices, largely due to strong competition.

The business expectations sub-index also slowed to 71.58 from 79.47 in October, which was its fastest expansion since March 2008.

Data showed optimism among Indian service companies was lower in November than in the previous month, reflecting weaker trends in output and new business.

“Even so, overall business sentiment remained strongly positive, with more than two-fifths of respondents confident that activity will grow in the next year," HSBC Markit said in the report.

“Demand for services is expected to improve due to a better economic situation, promotional activities and firms’ reputations for quality service," it said.

Asia’s third-largest economy grew an annual 7.9% in the September quarter, smashing forecasts of 6.3%, but growth was expected to slow this quarter when the impact of a weak monsoon would be seen on crops.

The economy could grow 7% this fiscal year, with industrial output and services offsetting an expected decline in farm output, but it will be inflation that determines the central bank’s monetary policy, a top government official said on Tuesday.