Going from 52.8 in January to 55.3 in February, India’s services trade activity index showed the fastest rate of output expansion in a year.
The hard-hit service sector is gradually recovering
It was the fifth month in a row that the index has remained above the 50 point mark that separates expansion from contraction. Survey participants attributed the recovery to improved demand and more favorable market conditions.
The IHS Markit India Services PMI is compiled from responses to questionnaires sent to a panel of around 400 companies in the service sector. Sectors covered include consumption (excluding retail), transport, information, communication, finance, insurance, real estate and business services.
The numbers will encourage businesses as well as the government, as services were found to be slow to recover from the impact of Covid as people avoided venturing out. The service sector, which includes hotels, restaurants, hospitality and tourism, has been hit hard by the Covid-19-induced lockdown.
With the opening of the economy, the sector began to plan for a slow recovery. The overall economy, which hit a record low of 24.4% in the June quarter of the current fiscal year, also recovered strongly and posted a 0.4% increase in the December quarter. While the economy is expected to contract by 8% in 2020-2021, several estimates show that it will organize a strong rebound in 2021-2022. The International Monetary Fund predicts the economy will grow 11.5% in 2021-2022 to become the world’s fastest growing large economy.
“The February PMI data showed solid growth for the Indian service sector which, along with a strong recovery in manufacturing output, pushed the composite output PMI to a four-month high,” said Pollyanna De Lima , Associate Director of Economics at IHS Markit. .
“Economic activity is generally expected to pick up in the last quarter of fiscal year 2020-2021 following the exit from the technical recession in the third quarter, and the latest improvement in PMI indicators indicates strong expansion in the fourth quarter if growth momentum continues. maintains in March, ”De Lima said.
The survey showed that employment fell for the third month in a row and that companies noted the biggest increase in overall spending in eight years. New work entries increased for the fifth consecutive month, and at the fastest pace during this streak. According to the companies, the marketing efforts and the increase in the number of new customers have resulted in sales growth. Respondents continued to report that the Covid-19 pandemic and travel restrictions had dampened international demand for their services. New export orders fell for the twelfth month, but at the weakest pace since last March, according to the survey.
“The hope that the Covid-19 vaccination program will succeed in reducing the number of cases across the country has underpinned positive expectations about the outlook for growth. The overall level of optimism regarding the outlook for 12-month trading activity has strengthened to a one-year high, ”the survey found.