India’s services sector activity slowed down in June owing to a decline in new business orders and subdued economic conditions, an HSBC survey said.

The HSBC/Markit purchasing managers’ index for the services industry, which was released today, fell from May’s three-month high of 53.6 to 51.7 in June.

The services sector, which accounts for around 60 per cent of India’s GDP, witnessed moderation in June as the pace of growth in new orders placed at private sector firms was the weakest in the last 50-month period, HSBC said.

Moreover, subdued economic conditions were also a major factor behind the deceleration in output growth, HSBC said.

A reading above 50 shows that the sector is expanding, while that below 50 shows that the output in the sector is contracting.

“Service sector activity grew at a slower clip as new business flows moderated, which made businesses less optimistic about the year ahead,” HSBC Chief Economist for India and ASEAN Leif Eskesen said.

The slower pace of growth in the services sector is reflected in service providers’ subdued optimism towards output growth in the next 12 months.

Earlier this week, the HSBC/Markit manufacturing PMI showed that the manufacturing sector output remained broadly flat in June as new orders declined for the first time in over four years.

Accordingly, the HSBC India Composite Output Index, which maps both services and manufacturing activity, fell from 52.0 in May to 50.9 in June.

“Notwithstanding the slowdown, inflation readings firmed (up) on the back of higher labour and raw material prices, with the depreciation of the rupee also cited as a factor,” Eskesen said.

The rupee last week sank to an all-time low of 60.76 against dollar on heavy capital outflows and month-end dollar demand from importers.

Related Topics