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India services sector growth dips to 13-month low
June 3, 2015, 6:04 am

Indian Central Bank Governor Raghuram Rajan said on Tuesday that India's growth rate may be weaker than headline numbers suggest and demand has yet to pick up strongly [Image: Archives]

Indian Central Bank Governor Raghuram Rajan said on Tuesday that India’s growth rate may be weaker than headline numbers suggest and demand has yet to pick up strongly [Image: Archives]

India’s services sector grew at the slowest pace in thirteen months in May as growth in new business weakened, a private survey showed, raising expectations that policymakers may unveil more measures to revive growth in Asia’s third largest economy.

The HSBC Services Purchasing Managers’ Index (PMI) tumbled to a 13-month low of 49.6 in May. The PMI for April stood at 52.4.

The reading at 50 separates growth from contraction.

“Restrained demand accompanied by sweltering heat and the earthquake led to falling new work. Nonetheless, the sector is expected to see a rebound in coming months, as these factors fade away,” said Pollyanna De Lima, economist at Markit.

The weakening performance of the services sector could fan market concerns about a possible economic stagnation in 2015 for India.

Indian Prime Minister Narendra Modi came to power in May 2014, vowing to get India’s economy back on track.

The post-election boost in sentiment needs to be supported by strident reform efforts, analysts warn.

“The bottom line is that in the absence of a reform push in areas like agriculture and infrastructure, growth will remain range-bound. Comfortable macroeconomic conditions and the political mandate of the government provide the best possible circumstances for such a push. Time is slipping away,” said a recent editorial in Indian daily Business Standard.

Official data last week showed India’s economy grew 7.5 per cent year-on-year in the previous quarter.

Indian Central Bank Governor Raghuram Rajan said on Tuesday that India’s growth rate may be weaker than headline numbers suggest and demand has yet to pick up strongly.

“Even with the 7.5 percent growth numbers, there is some discussion of how much that includes special factors in the last quarter, including excise taxes and subsidy. And so when you subtract that, the growth in the last quarter doesn’t look as strong as before,” Rajan said.

“And so, you could point to those numbers also suggesting growth is weaker than at least the headline numbers suggest,” he added.

 

TBP and Agencies

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