India's services activity gauge contracted to the lowest levels since September 2013 in July due to falling output and lower incoming work orders on Goods and Services Tax rollout.
The Nikkei India Services Purchasing Managers' Index (PMI)—compiled by Nikkei and research firm Markit—stood at 45.9 in July, compared to 53.1 in June. A reading below 50 indicates a contraction and a reading above it indicates expansion.
Services firms said the launch of the new indirect tax regime caused most of the contraction in new work orders, leading to lower activity, the report said.
Whereas many will question how deep an impact the GST will have on the economy in the near- and long-term, firms seem convinced that prospects will brighten as the new tax regime becomes clearer.Pollyanna De Lima, Economist, IHS Markit
Confidence regarding the year ahead rose to an 11-month high.
India's manufacturing activity index also contracted during the month, down to 47.9 - the lowest in eight-and-a-half years.
In the bi-monthly monetary policy announced on Wednesday, the Reserve Bank of India Governor Urjit Patel-led Monetary Policy Committee announced a 25 basis point rate cut owing to the drastic fall in inflation. The committee, however, maintained its neutral stance as it expects inflation to rise back to 4 percent by the end of this year.
Also Read: RBI Delivers A Rate Cut After A Pregnant Pause
Key Highlights
- Factory orders decreased at the quickest pace since February 2009
- Input costs rose on higher salaries and higher tax rates
- Services charges rose at the sharpest rate in almost four-and-a-half years
- Outstanding business in the service economy rose to the greatest extent in five months
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