Led by a faster growth in new business, India’s services sector grew to a three-month high of 51.9 in July, according to the India Services Business Activity Index.

This was the 13th straight month of expansion in service sector activity. It was marginally lower at 50.3 in June.

“Indian service providers enjoyed a welcome upturn in demand during July, with a faster increase in new business underpinning stronger growth of output and boosting confidence,” said Nikkei in a release on Wednesday.

A reading above 50 on the index denotes expansion while a reading below that reflects contraction.

With faster growth in manufacturing production, the seasonally adjusted Nikkei India Composite PMI Output Index also climbed to a three-month high of 52.4 in July against 51.1 in June.

“The Indian service economy started the second semester on a solid footing, posting its strongest performance since April and thereby indicating that underlying demand conditions remained reasonably firm,” said Pollyanna De Lima, economist at Markit.

More inputs from PTI

Job creation

Employment was broadly unchanged in both the manufacturing and service sectors during July, as indicated by the respective indices recording only fractionally above the crucial 50.0 threshold.

It has now been over two-and-a-half years since the private sector has seen meaningful job creation.

Inflation

Regarding inflation, Lima noted that “service providers signalled declining price pressures, with output charges being cut in line with an overall decrease in input costs’’.

Experts believe subdued inflationary pressures may prompt the Reserve Bank to cut key policy rates in the upcoming meet on August 9.

Monetary policy

In its policy review meet in June, RBI Governor Raghuram Rajan had kept interest rates intact, citing rising inflationary pressure, but hinted at a reduction later this year if good monsoon helps ease inflation.

The industry is still hopeful of further rate reduction from the apex bank to boost investment.

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