BANGALORE Jan 4 India's services sector
grew at its fastest pace in five months in December riding on a
surge in new business and expansion in employment, but rising
input prices will likely add to inflationary pressures in the
coming months, a survey showed.
The HSBC Markit Business Activity Index
-- based on a survey of around 400 firms -- rose to
54.2 in December from 53.2 in November, staying above the 50
mark that separates growth from contraction for the second month
in a row.
The index had contracted to levels below 50 in September and
sunk to a two-and-a-half year low of 49.1 in October.
In the December survey, the new business sub-index jumped to
55.7 from 52.3 in November, thanks to an improvement in demand.
"Activity in the services sector picked up pace in December
led by faster growth in new business, underscoring the
resilience of the sector," said Leif Eskesen, economist at HSBC.
Both the services PMI index and the new business sub-index
were at their highest levels since July.
The employment index, which expanded for the first time in
six months, also added to the positive mood of December's
Optimism over future business prospects remained strong and
improved slightly in December from a near three-year low in
While the services sector is certainly headed into 2012 on
an upswing, the headline PMI index is still a far cry from
2011's peak of 60.1 it hit in February.
Persistant risks of inflation clubbed with the lingering
euro zone crisis is likely to continue to mire the Indian
economy in 2012.
India's services sector includes the software services
industry which gets more than 90 percent of its revenue from
Two weeks ago, technology bellwether Oracle Corp
posted its first quarterly earnings miss in a decade, sending
renewed fears of a slowdown in technology spending rippling
across the globe.
Oracle's shocking results also had investors worried that
they had overestimated the resilience of corporate technology
spending in a fragile global economic environment.
In reaction to that news, shares of Indian technology
services stalwarts, including those of Infosys Ltd and
Tata Consultancy Services, fell.
Inflationary pressures in the Indian economy, which have
been snaking upwards over the past two months, intensified in
December with input prices growing at their fastest rate in nine
The Reserve Bank of India (RBI), which has been consistently
raising its key interest rates to battle inflation, kept rates
on hold at its Dec. 16 meeting as concerns over growth are seen
taking precedence over inflation in 2012.
An interest rate cut by the central bank might be on the
cards as the RBI Governor, Duvvuri Subbarao, told BBC in an
interview on Monday that a reversal of monetary tightening could
However, HSBC's Eskesen said the services and manufacturing
PMI numbers suggest that it is "premature" for the RBI to
replace inflation with growth as the main concern.
A similar survey of the manufacturing sector on Monday
showed India's manufacturing activity hit a six-month high in
December as factory output and new orders from domestic and
international firms spiked.
(Reporting By Deepti Govind; Editing by Andy Bruce and Ramya