India’s private sector activity contracted further in August, reflecting faster contractions of both manufacturing and services output, amid a decline in new orders and tough economic conditions, an HSBC survey said today.

The HSBC India Composite Output Index, which maps both services and manufacturing activity, fell to 47.6 in August from 48.4 in July. The index stands below the 50-mark, which marks contraction, for the second consecutive month.

According to HSBC, the contraction was largely on the back of a decline in new orders for the Indian private sector, which fell at the fastest pace in almost four-and-a-half years as an uncertain economic outlook has dampened client confidence.

Meanwhile, the services sector, which accounts for around 60 per cent of India’s GDP, fell from 47.9 in July to 47.6 in August, indicating a further, albeit moderate, contraction of output across the Indian service economy.

“Service sector activity slowed further in August led by weaker new business flows, which led to a slowdown in employment growth and a decline in sentiment among service sector companies,” HSBC Chief Economist for India and ASEAN Leif Eskesen said.

Earlier this week the HSBC/Markit manufacturing PMI showed that India’s manufacturing sector activity contracted for the first time in over four-and-a-half years in August as both output and business orders witnessed a significant decline.

Meanwhile, the degree of optimism across the service sector weakened for the third consecutive month and on the employment front there was a decline in job creation.

Moreover, price pressures firmed as input costs rose and were passed on to final prices.

“The numbers we have seen so far for July and August for both the manufacturing and service sectors point to a further slowdown in GDP growth during the third quarter,” Eskesen said.

According to official figures, the country’s economic growth in the April-June quarter slid to 4.4 per cent, the lowest in the past several years, pulled down by a drop in mining and manufacturing output.

Meanwhile, the country is battling a currency crisis as the rupee, which had touched an all-time intra-day low of 68.85 to a dollar on August 28, was hovering around the 68/USD level in a highly volatile trade today.

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