India's services sector growth rises to 8-month high in June

New Delhi: Services sector activity in India rose to an eight-month high of 53.1 in June, driven by a sharp jump in new work orders, suggesting an economic rebound going forward, a monthly survey said on Wednesday.

The Nikkei India Services Purchasing Managers' Index (PMI), which tracks services output on a monthly basis, increased to 53.1 in June, from 52.2 in May, signalling a "solid and accelerated" upturn in output across the sector.

"Growth of service sector activity and inflows of new business picked up as better demand conditions and marketing efforts bore fruit," said Pollyanna De Lima, economist at IHS Markit, and the author of the report.

The services PMI print came in above the critical 50, which separates growth from contraction, for the fifth month running in June.

Additionally, the headline measure averaged 51.8 for the first quarter of this year.

"June's figure contributed to the highest quarterly average for the composite PMI (52.2) since Q2 (FY) 2016. This suggests that GDP growth is likely to rebound from the sharp slowdown noted in the first three months of 2017," Lima added.

Meanwhile, manufacturing sector growth eased to a four- month low in June. With services being the prevalent sector in India, the slighter rise in manufacturing was more than offset and growth of private sector output climbed to an eight-month peak.

The seasonally-adjusted Nikkei India Composite PMI Output Index rose to an eight-month high of 52.7 in June, from 52.5 in May.

Greater workplace activity prompted some services companies to recruit more staff and job creation was maintained at May's 47-month record pace.

Meanwhile, inflationary pressure gained pace, with both input costs and output charges rising at quicker rates.

In the monetary policy review on June 7, the RBI left key rates unchanged, with Governor Urjit Patel noting that the central bank wanted to be more sure inflation stays subdued.

Lima, however, noted that the fall in confidence levels highlights that it will not be an "easy walk to stronger economic prosperity".

"Optimism weakened at goods producers and service providers alike, hampered by concerns among some firms that the goods and services tax could harm consumer demand, with competitive pressures also seen as a threat to the outlook," she said.