Services-sector activity in India edges up, but employment stays flat, survey shows

Store assistants help customers check out at the Big Bazaar Hypermarket store in Noida, India. Prashanth Vishwanathan / Bloomberg

Mumbai // Economic activity in India’s services sector edged up last month, although companies froze hiring amid continued weak demand, according to a survey released yesterday.

The HSBC services purchasing managers’ index rose to 47.2 in November from 47.1 in October. A reading below 50 is a contraction, while the opposite represents expansion.

“Triggering the latest fall in service sector output was a fifth consecutive monthly drop in new work,” HSBC said.

“The overall rate of contraction was moderate and little changed from that seen in October.

“Evidence from survey participants highlighted weaker demand, competitive pressures and tough economic conditions.

“Across the private sector as a whole, order books fell for the fifth successive month, but at the weakest pace in this sequence.”

The survey revealed that companies in the Indian services sector were cautious about hiring last month “as payroll numbers were broadly unchanged from October”.

Sonal Aurora, managing director of the recruitment firm Perfman HR, said sectors such as banking, financial services, insurance and telecommunications had been buffeted by India’s economic slowdown.

“There are a lot of people who say that hiring is slow, there are still elections and everything,” said Ms Aurora. “But it depends on which sectors you’re working in and what levels are you’re working at.”

She said there was increased hiring at her company in the retail sector in the current quarter compared with the previous quarter.

“There’s an upward trend already starting,” she said, citing factors such as India’s young population and rising spending power, which would help to drive growth.

Meanwhile, the hotels and restaurants sector suffered the sharpest drop in new business and output, according to the HSBC survey findings.

Leif Eskesen, HSBC’s chief economist for India and Asean, said service sector activity remained subdued, but would at least appear to be stabilising.

The data reinforces economists’ views that while there are signs of improvement in India’s economy, there is still a long way to go.

A survey released on Monday showed that India’s manufacturing activity returned to growth in November for the first time in four months.

The HSBC manufacturing purchasing managers’ index for India rose to 51.3 last month from 49.6 in October. That followed a better than expected GDP reading for India, released on Friday. Official data showed that the economy grew 4.8 per cent in the July to September quarter, up from 4.4 per cent in the previous quarter.

India has been struggling with slowing economic growth, high inflation levels and a weak currency.

Economists say that the domestic economic downturn seems to be bottoming out, although a sustained recovery could be difficult over the coming months. That is because the investment climate remains subdued amid political uncertainty ahead of the general elections in May, while projects have stalled because of bureaucratic hurdles.