February services sector PMI sees modest expansion

But rate of expansion was the second-slowest since July and was subdued by historical standards

Services sector activity in India picked up marginally in February on the back of better demand conditions and the retreat of the coronavirus pandemic, but the rate of expansion was the second-slowest since last July and was subdued by historical standards, a monthly survey showed.

Reflecting a moderate rate of expansion, the seasonally adjusted IHS Markit India Services Business Activity Index rose to 51.8 in February from 51.5 in January.

"The upturn was attributed by panellists to greater bookings, better demand conditions and the retreat of the pandemic. That said, the latest increase was subdued by historical standards, with some companies indicating that growth was dampened by competitive pressures, COVID-19 and higher prices," IHS Markit said in the survey released on Friday.

A Purchasing Managers' Index (PMI) reading of more than 50 indicates expansion while the level below 50 reflects contraction.

"New business and services activity expanded only modestly, and at the second-slowest rates since last July. Looking at the anecdotal evidence supplied by survey participants, inflationary pressures, input shortages and the local elections dampened growth," Pollyanna De Lima, Economics Associate Director at IHS Markit, said.

Following the escalation of the pandemic and an associated slowdown in growth during January, the services sector moved up a gear in February as COVID-19 cases declined and restrictions were lifted, the firm said.

Even though new business and output rose at quicker rates, those were below their respective long-run averages. "There was also an uptick in business confidence, but firms continued to shed jobs. Meanwhile, input costs increased at a softer rate as did output prices", the agency noted.