Rebound in India Services Offers Glimmer of Hope for Economy

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Indias dominant services sector rebounded last month, providing some cautious optimism the economy may be turning the corner.

The IHS Markit India Services Purchasing Managers Index rose to a four-month high of 52.7 in November, the first time in three months that the reading has been above 50 to mark an expansion in output. The improvement was driven by driven by higher orders and strengthening business confidence. The index is still below its long-run average of 54.2.

“Although the services economy shrugged off some of the weakness seen in September and October, the latest PMI results continue to sound a note of caution regarding demand and the underlying state of the sector,” said Pollyanna de Lima, a principal economist at IHS Markit.

The rise in the services index followed data earlier this week showing manufacturing also improved in November, resulting in the composite PMI index jumping to 52.7 from 49.6.

What Bloombergs Economists Say

The improved PMI data for November strengthens our view that the worst might be over for the economy and a shallow recovery lies ahead. Recent efforts by the RBI and the government are beginning to now show results and economic activity should pick further momentum over the next few months.

The latest surveys offer a glimmer of hope for the economy after data last week showed growth weakening to a six-year low of 4.5% in the July to September quarter. While services growth weakened last quarter, industries like finance and real estate, and trade, transport and communication posted solid expansion of 5.8% and 4.8% respectively from a year ago.

Government officials see last quarter‘s growth as the bottom of the cycle, with the economy’s fundamentals remaining strong.