GST slows service activity in November, PMI at 3 month low

Sluggish demand and lower customer turnout due to the Goods and Services Tax (GST) rollout made India’s service activity contract for the first time in three months in November, a private survey showed on Tuesday.

The Nikkei India Services PMI Business Activity Index plunged from 51.7 in October to 48.5 in November.
A reading above 50 indicates economic expansion, while a reading below 50 points toward contraction.

“Following modest growth in the previous two months, hopes of a sustained recovery in November waned as marked growth in the manufacturing sector was broadly offset by a downturn in the service sector,” said Aashna Dodhia, Economist at IHS Markit, and author of the report.
As per the survey, underlying data highlighted that service activity fell in response to a drop in new business during November. According to anecdotal evidence, July’s GST continued to affect businesses as it led to sluggish demand and lower customer turnout. As with the case with activity, the rate of contraction in new work was modest.

A similar survey last week showed manufacturing activity in November expanding at its fastest pace in 13 months.
Put together, the Nikkei India Composite PMI Output Index fell from 51.3 in October to a three-month low of 50.3 in November.

On employment front, despite unfavourable demand conditions, service providers continued to add to their workforce numbers. That said, employment growth eased to a modest pace and further away from September’s recent high.


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