Businesses recovered from cash ban shock, pick-up in new business flow too aided recovery
Services activity saw a rebound in February 2017 after having contracted for three months in a row since November 2016, signalling that the economy may have bounced back from the Prime Minister Narendra Modi's abrupt note ban shock of November 8, a private survey showed.
The Nikkei India Services Purchasing Managers Index inched up to 50.3 in February 2017 from 48.7 in January. Services PMI at 46.7 had slumped to a three-year low in November last year.
A print above no-change mark of 50 denotes expansion, while one below that reflects contraction.
February 2017 was the first month since October 2016 when services activity saw an expansion. The latest February print was also helped by pick-up in incoming new business. Turnaround in business activity and inflows of new work came from the financial intermediation and 'other services', the report showed.
With manufacturing production rising again in February 2017, the seasonally adjusted Nikkei India Composite PMI Output Index rose from 49.4 per cent in January 2017 to 50.7 per cent, pointing to the first increase in private sector activity across India since last October.
Commenting on the Indian Services PMI survey data, Pollyanna De Lima, economist at IHS Mark it and author of the report, said: "The upturn in services activity follows news from the sister PMI survey showing factory production growing for the second straight month in February.
It is still too early to state that expansion rates will climb to their trend levels in the near term. Companies remain reluctant to take on additional staff and confidence towards the 12-month outlook for output dipped to its second-lowest mark in over one year. These factors indicate that, so far, firms are doubtful about the sustainability of the economy recovery."