India’s service sector business dips

The growth in India’s services sector softened for the second straight month in May as new business inflows expanded at its slowest pace since July 2015.

The widely tracked Nikkei Services Business Activity Index dropped to 51 in May from 53.7 in April, the lowest reading since November 2015. A reading above 50 indica-tes growth, while a reading below 50 indicates contraction in growth.

Manufacturing production growth also eased, which combined with the slowdown in services resulted in a weaker increase in private sector output. The seasonally adjusted Nikkei India Composite PMI Output Index fell to a six-month low of 50.9 in May, from 52.8 in April.

“Latest PMI numbers raise doubts about the effectiveness of economic and monetary policies. The gloomy growth picture will be a concern to policymakers and will raise the chances of further cuts to interest rates by the RBI. This would be supported by subdued inflationary pressures, with May data pointing to weaker increases in both costs and charges,” said Pollyanna De Lima, economist at Markit, which compiles the survey.

According to the survey, growth of new work at services firms eased for the second month running in May. Wherever new business inflows expanded, panellists reported aggressive marketing campaigns. The survey participants also me-ntioned that growth was restricted by increased competition and the assembly elections.