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NEW DELHI : India’s services sector saw the growth rate fall to a three-month low in December, though the momentum of expansion continued. The IHS Markit India Services Purchasing Managers’ Index (PMI) for December issued on Wednesday stood at 55.5, lower than the November figure of 58.1.

The easing of the growth rate comes amid an increase in coronavirus cases across the country spurred by the highly contagious Omicron variant.

IHS Markit, however, said that the seasonally-adjusted India Services Business Activity Index was still consistent with a marked rate of economic expansion. The upturn was often associated with improving market conditions and accommodative demand.

“Indian services companies continued to report growth of sales and business activity in December. Rates of expansion moderated, but were nevertheless marked by historical standards," IHS Markit said.

Underlying data suggested that the latest increase in new orders was centred on the domestic market, as new business from abroad fell further. The deterioration in global demand was linked to covid curbs, particularly around travelling.

“The December services survey was conducted during 6-21 December, before covid cases started rising in India. As a result, the PMI may moderate further in the coming mon-ths," said Rahul Bajoria, chief India economist, Barclays. 

The December data showed renewed job shedding in the services sector, though the rate of contraction was marginal. As much as 96% of the companies surveyed left payroll numbers unchanged from November.

Service providers reported a further hike in expenses in December. Anecdotal evidence showed higher prices for chemicals, food, fuel, medical equipment and transportation. Although sharp and above its long-run average, the overall rate of inflation softened to a three-month low.

“The services PMI was supported by healthy growth in new business orders. Despite the strong rise in new orders, firms reported a slight decline in new hires, indicating the availability of excess capacity. Exports remain weak, as travel restrictions likely weighed on foreign demand. Pricing pressures also remained high, though there was some moderation from the elevated levels seen in November. Business confidence improved slightly, though remains subdued compared with historical standards," Bajoria said. 

Amid reports of rising expenses, prices charged for the provision of services in India increased at the end of 2021. The rate of charge inflation, however, was moderate, below trend and the weakest since September.

Business confidence strengthened in December to a four-month high, but sentiment remained subdued in the context of historical data. Some firms foresee further improvements in demand and expect marketing efforts to bear fruit. Others were concerned that the recovery could be dampened by price pressures and new covid waves.

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