India Services PMI Improves But Remain In Contraction Zone

A gauge of India’s services sector indicated some improvement in activities as the nation eased the restrictions imposed to contain the coronavirus pandemic.

The India Services Business Activity Index, compiled by IHS Markit, stood at 33.7 in June compared with 12.6 in May, according to a media statement. A reading below 50, however, indicates contraction in business activity.

The Composite PMI Output Index, measuring combined services and manufacturing output, rose to 37.8 in June from 14.8 in May. Still, it remains below the crucial 50.0 level.

The slower rate of decline was reflective of some stabilisation in activity levels, with around 59% of firms reporting no change in output since May. Only 4% registered growth, while 37% recorded a reduction, the statement said.

But demand continued to weaken on account of disruptions due to the pandemic. Total new orders fell at a faster pace in June, which according to the firms is because of reduced consumption habits and lower requirements at key clients. “In some instances, customers had closed their businesses due to the unfavourable environment,” the release said.

Weak exports orders, too, weighed on demand, with survey data pointing to yet another steep drop in export sales. The surveyed companies became more pessimistic toward prospects over the coming 12 months. Business confidence slid to a survey low. The heightened risk of a protracted recession was commonly noted by pessimistic firms.

Employment trends also continued to deteriorate as some companies reported poor availability of staff. Job losses were attributed to lower business requirements. There were signs of capacity pressures building in June as outstanding contracts rose.