Photo: Mint
Photo: Mint

Opinion | Green shoots in the services sector

PMI for services in Nov signals growth after two consecutive months of declines. This mirrors a turnaround in manufacturing

A fresh set of numbers seems to bear out the government’s claim that the economic slowdown is in the process of being arrested. The purchasing managers index for services in November signalled growth after two consecutive months of declines. This mirrors a turnaround in manufacturing, which a similar index showed as recovering after a particularly grim October.

In support of its contention, the government has also drawn attention to the analysis of credit rating agency S&P Global, which has maintained its sovereign rating for India with a stable outlook. The November up-move in the services PMI offers an additional spot of good news. It is accompanied by accelerated job expansion, even if this demand revival did not offer companies much scope to raise prices. Other details are also a mixed bag. The index clocked its ninth successive rise in new business from overseas markets, but overdue payments from clients led to a rise in the levels of work-in-hand for the second consecutive month.

Sightings of green shoots of recovery after India posted its slowest quarterly gross domestic product growth in six years is expected to inform the central bank’s monetary policy committee that will announce its bi-monthly decision on its policy rate of interest on Thursday. The Reserve Bank of India has cut interest rates by 1.35 percentage points in 2019 so far, and expectations are that it will lower its repurchase rate—at which banks borrow funds from it—at its last rate-setting meeting of the year. A quarter of a percentage point is what most analysts expect.