Services sector grows in Jan on new business orders

Services sector activity in India expanded in January on the back of increase in new business orders amid "solid" demand conditions, an HSBC survey said on Wednesday.

The HSBC India Services Business Activity Index, which tracks changes in activity at Indian services companies on a monthly basis, stood at 52.4 in January, up from 51.1 in December, signalling a solid expansion in business activity.

A score above 50 indicates that the sector is expanding, while a figure below that level means contraction.

"The January Services PMI was marked by faster expansions in activity and new orders," HSBC India Chief Economist Pranjul Bhandari said.

This is the ninth consecutive month of sustained growth of new business orders among Indian services companies which was largely driven by higher new work inflows amid "solid" demand conditions and new marketing initiatives.

Moreover, Indian service providers were the most upbeat regarding the 12-month outlook for activity since mid-2014 in January.

Panel members attributed optimism to anticipated improvements in demand and new commercial initiatives. Despite solid growth of activity and new business orders, payroll numbers in the Indian service sector rose only fractionally in January.

Meanwhile, the headline HSBC Composite Output Index -- that maps manufacturing as well as services sectors output -- rose from 52.9 in December to 53.3 in January, signalling further growth of private sector output in January. On prices, the report said input costs faced by Indian services firms rose for the second straight month in January.

"On the inflation front, both input and output prices rose further, though at a modest pace when compared to historical trends," Bhandari said.

She added that "we expect RBI to cut rates by a total of 75 bps in 2015, but no further as latent inflation pressures could pick up when growth sees a meaningful lift."

The Reserve Bank had on Tuesday left interest rates unchanged, saying there was no substantial development on inflation or fiscal fronts to warrant a fresh reduction.

This stance follows a surprise rate cut by RBI on January 15 to tackle dis-inflationary pressure. Accordingly, the RBI left the short-term lending rate (or repo rate) at 7.75 per cent and the cash balance requirement on the lenders (or CRR) at 4 per cent.