Services activity in India returned to marginal growth in December despite continued disruption stemming from the implementation of the Goods and Services Tax.
The Nikkei India Services Purchasing Managers' Index rose to 50.9 in December from 48.5 in November, according to a statement by Markit. It fell for the first time in three months. A reading above 50 indicates economic expansion, while a reading below 50 signals contraction.
Services activity grew on the back of growth in the information and communications, and the finance and Insurance segments. All other segments saw a decline in activity. Cost inflationary pressures also eased from November's high, according to the report.
However, those firms that saw a fall in new orders said that GST continued to weigh on underlying sales volumes.
Greater backlogs continued to accumulate as a result of cash shortages and delayed payments that stemmed from the disruption of recent structural reforms.Aashna Dodhia, Economist, IHS Markit
In comparison to the services sector, manufacturing activity hit a five-year high in December on the back of increasing business activity and new orders.
Composite Index Climbs
Overall output came in at a reading of 53 in December, the sharpest improvement since October 2016 and above the 2017 average. The Composite PMI Output Index stood at 50.3 in November.
Outstanding work rose at both manufacturers and service providers, implying cash shortages and delayed customer payments, as per the report.
Service providers increased recruitment in response to the rise in activity with job growth quickening to the fastest since September. “Job creation in both sectors outstripped historical averages signalling a continued revival of the labour market,” Dodhia said in an accompanying statement.
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