India’s Service Sector Growth For August Dips From a Weaker Demand

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India’s service sector grew at a slower pace for the month of August when compared to July due to a weaker demand and rising input costs. The Nikkei/IHS Markit Services Purchasing Managers’ Index (PMI) has fallen to 51.5 in August 2018 from 54.2 in the previous month. The July result was also the country’s 21-month high.

India's Service Sector Growth For August Dips From a Weaker Demand

The new reading has been lower for the first time since May but remained above the 50-mark that separates growth from contraction for a third straight month.

For the month under review, new businesses expanded at a weak rate amid rising price pressures that have weighed on overall activity, causing the slowest hire rate in service firms since November 2017. Input costs accelerated for the service sector “fueled by higher oil-related prices,” and unable to pass on the complete burden to the ultimate customers, the report said. To cushion waning demand, firms were modest in their price increase.

Pressure from inflation and a strong growth (8.2 percent) of the Indian economy during the last quarter will help RBI (Reserve Bank of India) remain on track for a tighter monetary policy.

The manufacturing sector also saw a drop in the growth rate for August, thus pushing the composite PMI to a three-month low of 51.9 for the month. In July it was at 54.1.

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