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Rising cost pressures, GST hit services output

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Rising cost pressures, GST hit services output

Mumbai : Rising cost pressures, along with the after effects of the roll out of the Goods and Services Tax (GST), in July 2017, dragged the output of the Indian service sector lower in November, key macro-economic data showed on Tuesday.

 According to the seasonally adjusted Nikkei India Services Purchasing Managers’ Index (PMI) Business Activity Index, the service sector’s output dipped into contraction territory in November following a growth in the previous two months.


  The reading for November fell to 48.5 from 51.7 in October. “Panellists widely blamed the deterioration in business performance to the goods and services tax (GST). Meanwhile, cost pressures intensified during the latest survey period,” the PMI report said. An index reading of above 50 indicates an overall increase in economic activity and below 50 an overall decrease. The impact of lower Services PMI further subdued the overall private sector’s output during November, reports IANS.

“Following modest growth in the previous two months, hopes of a sustained recovery in November waned as marked growth in the manufacturing sector was broadly offset by a downturn in the service sector,” said Aashna Dodhia, economist at IHS Markit and the author of the report.

“Business under-performance emanated from July’s GST which contributed to sluggish demand and lower customer turnout, according to anecdotal evidence.” Earlier, the Nikkei India Manufacturing PMI for November came in at 52.6, the highest reading since October 2016. “Anecdotal evidence indicated firms were unable to fully pass on higher cost burdens to customers amid intensive competitive conditions,” the manufacturing PMI release said.