India’s services sector activity at 4-year low: HSBC survey

Activity in India's services sector slumped to its lowest in more than four years in July, an HSBC survey said on Monday, deepening concerns for an economy already battered by an endless industrial slowdown and decade-low growth amid almost runaway inflation.

The HSBC Services Business Activity Index fell to 47.9 in July from 51.7 in the previous month, the lowest reading since April 2009.

A figure below 50 indicates contraction in activity, and this is the first time services output in the country has contracted since October 2011.

HSBC's index for manufacturing, released last week, was at 50.1 in July. With the HSBC Composite Index at 48.4, it suggests an overall contraction in the output of manufacturing and services companies in the country in July.

In fact India's contraction is in keeping with the trend across developing economies. The composite HSBC Emerging Markets index for services and manufacturing fell to 49.4 in July from 50.6 in June and below the 50 mark that separates growth from contraction.

The HSBC survey collects data from purchasing managers at about 7,500 firms in 16 emerging markets. The index is calculated using data produced by Markit.

Traditionally, the services sector in India has grown at a faster rate than the overall gross domestic product (GDP) and a deceleration in this sector, amid a decline of new orders, presents another headache for an already battered economy caught in a stagflation bind.

New business received by Indian services firms fell in July, ending a 50-month expansionary sequence, said the survey, which cited intense competitive pressure, weaker demand and a fragile domestic economy as the main reasons behind the contraction in incoming new work.

The fastest drop in new business was registered by transport and storage companies, followed by renting and business activities.

The stormy beginning to the monsoon session of Parliament on Monday dampened hopes of the government being able to push through reforms needed to revive economic climate and business sentiment.

Industrial production was up a mere 0.1 per cent in April-May this year while exports were down 1.4 per cent in the first quarter from a year ago.