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Slowdown Blues: India's services activity at 12-month low in May amid election disruptions

"The seasonally adjusted Nikkei India services business activity index fell to 50.2 in May, from 51.0 in April, indicating the slowest growth rate in the current 12-month stretch of expansion," IHS Markit said in its report

twitter-logo BusinessToday.In   New Delhi     Last Updated: June 5, 2019  | 21:36 IST
Slowdown Blues: India's services activity at 12-month low in May amid election disruptions
According to the report, there were signs that the slowdown may be temporary as companies stepped up hiring and became more confident about future prospects

India's services sector activity slipped to a twelve month low in May, as disruptions arising from the elections in the earlier part of the month hampered growth of new work intakes, according to a monthly survey data.

"The seasonally adjusted Nikkei India services business activity index fell to 50.2 in May, from 51.0 in April, indicating the slowest growth rate in the current 12-month stretch of expansion," IHS Markit said in its report.

However, the report added that there were signs that the slowdown may be temporary as companies stepped up hiring and became more confident about future prospects. Firms were also helped by a lack of inflationary pressures in the sector, it said.

Some firms suggested that output rose in tandem with ongoing sales growth, while competitive pressures and the elections reportedly curbed the upturn, the report released by IHS Markit highlighted.

Commenting on the Indian Services PMI survey data, Pollyanna De Lima, Principal Economist at IHS Markit, and author of the report, said, "India's dominant service economy again suffered the impacts of election disruptions, with growth of both new work and business activity softening for the third straight month. With this now over, upcoming releases of PMI data will be key in showing whether the sector was only hampered by the elections or is actually cooling."

Also Read:World Bank retains India's projected growth forecast at 7.5%; to keep same pace for next two fiscal years

"Taking the results released today in conjunction with manufacturing sector data published on Monday, PMI figures show that the combined private sector remains in good health. Some ground was lost so far in the first quarter of fiscal year 2019/2020 but, with a government formed and a resumed policy agenda, a recovery is expected as we head towards the second half of 2019," Lima added.

Now that Narendra Modi's is back as the prime minister for the second time after the landslide victory in the 2019 Lok Sabha Elections, the government is expected to roll-out bolder reforms.

Also Read:India Inc's business confidence down 9.1% in Q4 of FY19, shows survey

The seasonally adjusted Nikkei India Composite PMI Output Index stood at 51.7 in May, unchanged from April, which was indicative of a moderate pace of increase that was the joint-slowest since last September.

The data comes ahead of the Reserve Bank of India's monetary policy review decision which will be announced on Thursday.

Edited by Chitranjan Kumar

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