SERVICES SECTOR SET TO RETURN TO EXPANSION AS SEPT PMI PRINTS 49.8

NEW DELHI: Amid reports of the relaxation of coronavirus pandemic 2019 (Covid-19) restrictions, Indian service sector output broadly stabilised during September, according to the latest IHS Markit Services Purchasing Managers' Index (PMI) released.

Encouragingly, survey participants were upbeat about the yearahead outlook for business activity for the first time since April.

On a less positive tone, there were further reductions in new work and employment. Incoming new business fell moderately, however, and at the slowest rate since March. Input costs meanwhile rose at a quicker pace while the rate of charge inflation was broadly similar to August.

The seasonally adjusted India Services Business Activity Index rose for the fifth straight month in September from 41.8 in August to 49.8. The latest reading was indicative of broadly stable output across the sector.

A reading above 50 means expansion and below it contraction.

Monitored companies that observed growth commented on the reopening of business units amid the loosening of lockdown rules. Firms that reported a contraction mentioned the damaging impact of the pandemic on demand.

Indeed, overall new business declined. The fall was the seventh in consecutive months, though moderate and the weakest since March.

New orders from abroad likewise contracted at the slowest pace in six months but here the reduction was sharp. International demand was restricted by the global Covid-19 pandemic.

In line with hopes that a vaccine for Covid-19 will be rolled out, companies were optimistic about the year-ahead outlook for business activity.

September marked the first month since April in which service providers were confident towards growth prospects.

"The relaxation of lockdown rules in India helped the service sector move towards a recovery in September," said Pollyanna De Lima, Economics Associate Director at IHS Markit.

"We could see a better employment trend in coming months provided that people are willing to leave their hometown in search for vacancies," she said.