India service sector contracts for third month

August 04, 2021 11:48

India's services sector remained in contraction territory for the third straight month in July, as business activity, new orders and employment declined further largely due to the COVID-19 pandemic and local restrictions, a monthly survey said on Wednesday.

The seasonally adjusted India Services Business Activity Index rose from 41.2 in June to 45.4 in July, but was stuck in the red due to subdued demand conditions amid the COVID-19 crisis.

In Purchasing Managers' Index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction. "The current COVID-19 environment continued to weigh on the performance of the service sector that is so crucial to the Indian economy. July data was somewhat disappointing, with incoming new business and output falling solidly over the month, but there was at least a slowdown in rates of contraction," Pollyanna De Lima, Economics Associate Director at IHS Markit, said.

Looking ahead, firms were pessimistic about the 12-month outlook for output for the first time in a year. "Uncertainty over when the pandemic will end, as well as concerns about inflationary pressures and financial troubles, dampened business confidence in July. Service providers were pessimistic towards the outlook for business activity for the first time in a year," Lima said.

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