Inflation puts pressure on India’s services sectors’ PMI; Growth slows down in December

Higher prices for transportation, vegetables and medical equipment fueled input costs but firms passed less of that burden to customers.

In a fifth straight month in December, India’s services sector has expanded at a slower pace than in the previous month as the demand continues to grow but the concerns over 3rd wave of COVID-19 and the pressure of inflation on the economy cast a shadow over the country’s economic outlook, a survey said.
A data collated and filed by a financial and analytic firm IHS Markit under Wednesday’s Services Purchasing Managers’ Index. The firm’s report said India’s services outlook eased to 55.5 in the month of December from 58.1 in November, however, the country scored lowest since September but it is well above the 50-mark that separates growth from contraction.
“2021 was another bumpy year for services providers and growth took a modest step back in December. Still the data pointed that there is an increment in its sales and services activities as compared to the survey,” said Pollyanna De Lima, Economics Associate Director at IHS Markit.
“Uncertainty surrounding the outlook, and a general lack of pressure on capacity, led to a renewed fall in employment during December. That said, the decline was marginal and a recovery is expected this year should demand services remain favourable,” De Lima said.

India’s tourism and export business continued to decline as the country reported its highest number of cases since September last year. The lockdowns and travel curbs related to the pandemic have weighed on domestic and international sales.

The overall sentiment of the index was eased to 56.4 in December from 59.2 in November, the lowest since September but is supported by a robust pace of manufacturing in the country. India’s central banker the Reserve Bank of India (RBI) is not keen to raise the interest rates until the next quarter, they are keeping the inflation in check within its 2%-6% target since July last year.

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