India services PMI surges to three-month high in July, backed by strong business inflow

India’s services sector expanded at the fastest pace in the three months ended July, backed by a strong inflow of business amid strong underlying demand conditions, a monthly survey showed.

The Nikkei India Services Business Activity Index, which tracks changes in activity at service companies on a monthly basis, increased to 51.9 in July, up from 50.3 in June, data released showed Wednesday. With growth of manufacturing production also quickening, the seasonally adjusted Nikkei India Composite PMI Output Index also climbed to a three-month high of 52. 4 in July as against 51.1 in June.

The survey showed June was no different for job creation with almost all survey members reporting the same staff levels. It has now been over two-and-a-half years since the private sector has seen meaningful job creation. The same staffing levels as in May, the survey pointed out.

Moreover, amid reports of lower prices paid for fuel and some commodities, average input costs facing service providers fell in July. The decrease was the first since September 2015 and the rate of reduction was slight overall.

Further, business sentiment among Indian service providers improved during July, with the degree of optimism reaching a four-month high. Data released earlier this month showed that the manufacturing output has recovered to some extent, rising to 51.8 in July from 51.7 in June, mainly on the back of rising new business. This has resulted in pushing up the Nikkei India Composite PMI Output Index in July, which rose to a three-month high of 52.4 from 51.1 in June.

Meanwhile, the Reserve Bank of India Governor Raghuram Rajan kept interest rates on hold at the bank’s June monetary policy meeting. However, he hinted at a rate reduction move, if rains suffice to control inflation. The country is still hopeful of his words, to boost investment.