Business activity returns to growth amid rising new work

New Delhi: Indian service providers signalled a moderate rebound in business activity during November with the return to output growth accompanied by a renewed rise in new business intakes, faster job creation and strengthening business confidence, according to IHS Markit India Services Purchasing Managers’ Index (PMI) released on Wednesday.

Meanwhile, pressures on operating margins intensified with cost burdens increasing at a more marked pace than average selling prices. Posting 52.7 in November (October 49.2), the IHS Markit India Services Business Activity Index signalled output growth for the first time in three months.

The upturn was associated with a pick-up in demand, improved technology and rising client numbers. The headline figure remained below its long-run average of 54.2.

The modest expansion of services activity was achieved by growth in three of the five categories monitored by the PMI survey — consumer services, information and communication, real estate and business services. Activity fell at transport and storage besides finance and insurance firms.

Overall volumes of incoming new work increased to the greatest extent in four months following a stabilisation in October. Companies that reported higher sales generally cited better demand conditions.

November data signalled a ninth successive rise in new business from international markets with the pace of expansion accelerating slightly from October.

“The main positive to be taken from November’s survey was a renewed increase in new work which provided the platform for the growth of services activity and employment while resulting in an improvement in business confidence,” said Principal Economist at IHS Markit Pollyanna de Lima.

“But while the sector moved along nicely and looks set for sustained expansion in December, there were signs of fragility. Rates of expansion in sales and activity were mild by historical standards while the degree of business confidence remained subdued,” he said in a statement.

However, following back-to-back contractions, Indian private sector output expanded in November. The upturn reflected faster growth of manufacturing production and a renewed rise in services activity.

The Composite PMI Output Index rose from 49.6 to 52.7, signalling a moderate pace of increase that was below the long-run survey average.

Aggregate new orders increased for the second straight month in November and to the greatest extent since July. Growth was seen in both the manufacturing and service sectors.

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