Services sector back on growth track, job-creation at 7-yr high

New Delhi: Indian services sector activity returned to its growth track in March, driven by greater inflows of new work, following which firms increased their staffing levels at the fastest pace in 7 years, says a monthly survey.

The seasonally adjusted Nikkei India Services Business Activity Index improved from 47.8 in February to 50.3 in March, indicating that business activity stabilised during the month.

The index slipped below the 50-point mark, that separates expansion from contraction, in February.

"India's service activity stabilised at the end of the quarter, underpinned by a renewed rise in new work. Anecdotal evidence highlighted an improvement in demand conditions," said Aashna Dodhia, Economist at IHS Markit, and author of the report.

Meanwhile, the headline seasonally adjusted Nikkei India Composite PMI Output Index, rose from 49.7 in February to 50.8 in March, driven by growth in both the manufacturing and service sectors.

"Overall, the decline in activity during February proved to be transitory as Indias overall economy returned to expansion territory in March. Output growth in the manufacturing sector again outperformed the service sector, as has been the case since last autumn," Dodhia said.

Reflecting improved demand conditions and pressure on current resources, service providers expanded capacity by raising their staffing levels at the quickest pace since June 2011.

"In response to efforts undertaken by the government to formalise the economy, more people are gravitating towards employment as signalled by the latest PMI data. Indeed, job-creation accelerated to the quickest since June 2011," Dodhia said.

On the price front, India's service sector firms continued to face higher cost burdens during March, the survey noted.

Meanwhile, pressure has been mounting on the Reserve Bank of India (RBI) to cut interest rates in the wake of declining retail inflation and the need to fuel growth momentum.