Businesses get confident about growth recovery; private activity expands, pulls up Services PMI

Business & Economics

despite the improvement in service activity, there were further reductions in new work and employment in the month.

India’s services activity improved for the fifth straight month in September 2020, however, the contraction continued to affect the businesses. Led by the reopening of business units and loosening of lockdown rules, services PMI rose from 41.8 in August to 49.8 in September. It was also for the first time in September when the service providers were confident about growth prospects. 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, said the IHS Markit report. 

Overall, the private sector activity expanded during September. The upturn was supported by the sharpest increase in manufacturing production in close to 13 years and stabilisation of services activity. Rising from 46.0 in August to 54.6, the Composite PMI Output Index signalled a marked rate of activity growth across the private sector economy. There was also a renewed increase in aggregate new orders, which took place for the first time since February. 

“The relaxation of lockdown rules in India helped the service sector move towards recovery in September. Private sector output expanded for the first time in six months during September, and at an above-trend rate, while the increase in sales was the first since February,” said Pollyanna De Lima, Economics Associate Director at IHS Markit. The news will be welcomed by policymakers, particularly following the pandemic related economic contraction of 23.9 per cent in the first quarter, Pollyanna De Lima added. 

However, despite the improvement in service activity, there were further reductions in new work and employment in the month. While some firms lowered headcounts due to ongoing declines in new work intakes, others reportedly attempted to increase them but could not find suitable candidates for current job openings. Many firms also reported that attempts to take on extra workers were hampered by a lack of available labour. Meanwhile, the report suggested that hiring efforts will continue in the near-term, provided that people are willing to leave their hometown in search of vacancies.

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