India Services PMI falls to 50.3 in November as business activity slows
The service sector in India has been impacted due to the new tax regime that was implemented earlier this year.
- Services PMI stood at 51.3 in October 2017.
- It was 49.1 in November 2016.
- Analysts said business activity has slowed on account of GST roll-out.
Slowdown in business activity during the month of November has led to contraction of India’s Services PMI during the same period. The composite Services PMI data put out by Nikkei on Tuesday stood at 50.3 in November as compared to 51.3 in October.
“With growth in manufacturing production offsetting the fall in services activity, private sector output rose for the third consecutive month in November. Reflecting a slowdown in output growth, the Nikkei Composite Output Index fell from 51.3 in October to a three-month low of 50.3 in November,” the Nikkei report said.
“Posting below the no-change mark of 50.0 in November, the seasonally adjusted Business Activity Index signalled a contraction of the service sector for the first time in three months,” the report added.
The slowdown in business activity was attributed to the rollout of Goods and Services Tax (GST) which was implemented from July 1, 2017.
“Panellists widely blamed the deterioration in business performance to the goods and service tax (GST). Meanwhile, cost pressures intensified during the latest survey period,” the report said.
The GST Council has recently revised the rates on a number of goods including restaurants. The Council slashed the GST rates on AC and non-AC restaurants to 5% from the earlier 18% during its 23rd meet.
In the year ago period in November 2016, the Services PMI was at 49.1 as per Bloomberg data which means that the slowdown was ‘moderate’.
In contrast, the manufacturing PMI data rose to a 13-month high of 52.6 in November. This has been the highest PMI registered since October 2016.
Input cost price inflation accelerated ‘to the fastest since October 2013’.
“Following modest growth in the previous two months, hopes of a sustained recovery in November waned as marked growth in the manufacturing sector was broadly offset by a downturn in the service sector. Business underperformance emanated from July’s Goods and Services Tax (GST) which contributed to sluggish demand and lower customer turnout, according to anecdotal evidence,” Aashna Dodhia , Economist at IHS Markit, and author of the report, said.