The pace of contraction in services sector activity eased considerably in September after the government lifted some COVID-19 restrictions, but demand continued to shrink, prompting firms to cut more jobs, a business survey showed on Tuesday.
Signs of stabilisation in services are likely to provide more comfort to policymakers after a sister survey last week showed India’s manufacturing expanded at its fastest pace in over eight years, suggesting business conditions were gradually returning to normal in Asia’s third-largest economy.
The Nikkei/IHS Markit Services Purchasing Managers’ Index (PMI) bounced to 49.8 in September from August’s 41.8, a touch below the 50 mark that separates expansion from contraction on a monthly basis.
But September was the seventh straight month that activity had contracted, the longest such stretch since a 10-month run to early 2014.
“The relaxation of lockdown rules helped the service sector move towards a recovery in September,” Pollyanna De Lima, economics associate director at IHS Markit, said in a release. “Participants of the PMI survey signaled broadly stable business activity and a much softer decline in new work.”
The services sector accounts for about 55% of India’s economy and almost a third of its jobs.
Although improved from August, sub-indexes tracking domestic and foreign demand remained firmly in contraction territory, leading firms to cut their workforce for the seventh straight month, the longest streak.