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Services activity grows for first time in nearly a year

Rahul Karunakar     June 4, 2014

Activity in India's huge services industry expanded for the first time in nearly a year in May, driven by a surge in new business, a survey showed on Wednesday.

The HSBC Services Purchasing Managers' Index, compiled by Markit, rose to 50.2 in May from 48.5 in April, the first rise above the 50-mark that divides growth from contraction since June last year.

A landslide win for Narendra Modi and his Bhartiya Janata Party - which created India's first majority government in three decades - has fuelled expectations for key economic reforms after years of policy paralysis.

That optimism showed in the new business sub-index, which rose to 50.5 in May, also the highest since last June.

The PMI data also showed input costs and prices charged by services companies rose at a slower pace last month.

Inflation has eased this year. Reserve Bank of India Governor Raghuram Rajan opted to keep the central bank's key repo rate unchanged at 8 per cent on Tuesday, as expected, after a series of rate rises.

Factory activity expanded at a slightly faster pace in May, while input prices rose at their slowest rate in over a year, a similar business survey showed on Monday.


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