The reintroduction of restrictions and the escalation of the pandemic had a negative impact on the growth of the services sector. The rate of new business and production growth was the slowest in six months.
The impact of growing concern about the Corona epidemic is beginning to be felt in the country’s service sector. Due to sluggish demand, service sector activity slowed to its slowest pace in six months in January.
IHS Markit India’s Service Business Activity Index fell to 51.5 in January from 55.5 in December, owing to slow progress on both new business and production fronts. This is the slowest expansion rate in the last six months.
However, the services sector’s output has increased for the sixth month in a row. A Purchasing Managers’ Index (PMI) value greater than 50 indicates expansion, while a value of less than 50 indicates contraction. According to Pauliana de Lima, Associate Director (Economics) at IHS Markit, the rapid spread of Omicron has resulted in a decrease in demand due to restrictions imposed in some parts of the country. The reintroduction of restrictions and the escalation of the pandemic had a negative impact on the growth of the services sector. The rate of new business and production growth was the slowest in six months.
Costs are at their highest in a decade, and employment is also down.
According to Lima, January’s price data indicated a significant increase in spending among service providers. Since December 2011, inflation has pushed corporate costs to a decade high. At the same time, private-sector employment fell for the second month in a row. Despite being modest, the job loss rate in January was higher than in December.
Companies are increasingly concerned that the re-imposition of restrictions as a result of the pandemic and inflationary pressures will harm growth. Concerns about how long the current corona wave will last will erode business confidence. Jobs will also be lost. Meanwhile, the overall PMI production index in January 2022 was 53.0. This is the slowest rate in six months. This figure was 56.4 in December.
Keeping a close eye on the RBI meeting
The RBI’s Monetary Policy Committee will meet next week amid rising inflation. On February 9, 2022, an announcement regarding policy rates will be made. This will reveal whether or not the central bank cuts interest rates to control inflation. Finance Minister Nirmala Sitharaman, on the other hand, stated in her budget that the government will borrow approximately Rs 11.6 lakh crore from the market in 2022-23 to meet its expenditure requirements.