India’s service sector remains stuck in contraction during July

India’s service sector remained into contraction territory in the month of July, largely due to the COVID-19 pandemic and local restrictions. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index stood at 45.4 in July from 41.2 in June. Further, the Nikkei India Composite PMI Output Index -- which measures both manufacturing and services – stood at  49.2 in July from 43.1 in June.

The report said that new work intakes also fell for the third month running in July, albeit at a softer pace than in June. In addition to challenging conditions domestically, firms observed a further deterioration in international demand for services. New business from abroad decreased at a sharp pace that was little-changed from June.

On the inflation front, input costs increased further in July. The overall rate of inflation quickened from June and outpaced its long-run average. Output charges also rose at quicker pace in July, the fastest in the current five-month sequence of increase, but the rate of inflation was below its long-run trend. Companies that hiked their fees cited the partial pass-through of greater cost burdens to clients.