New Delhi : Services sector contracted for the first time in 13 months in May as orders turned sluggish and companies raised prices, an HSBC survey showed on Wednesday, raising fresh concerns about the real economic growth at ground level.
A composite HSBC index for the manufacturing and services sectors also fell in May to the lowest level in seven months.
The data comes at a time when concerns are being raised in various quarters about the economic recovery process and forecast of deficient monsoon is resulting in renewed fears about inflation and on other macroeconomic fronts.
RBI Governor Raghuram Rajan had also said that growth at ground level may be weaker than what is being suggested by the higher headline GDP numbers.
The HSBC India Services Business Activity Index, which tracks changes in activity at service companies, fell to 49.6 in May, from 52.4 in April as output prices in the private sector rose further with the rate of inflation being the highest in 13 months.
The index went below the crucial 50 mark, which separates growth from contraction, for the first time in 13 months.
Competitive pressure and natural disasters also led to the decrease in new business inflows, which declined for the first time since April 2014, HSBC said.
“Restrained demand accompanied by sweltering heat and the earthquake led to falling new work. Nonetheless, the sector is expected to see a rebound in coming months as these factors fade away,” Markit Economist Pollyanna De Lima said.
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FDI dips 40% in March to $2 bn
Foreign direct investment (FDI) in India declined by 40% year-on-year to $2.11 billion in March 2015, the lowest in the last four months of 2014-15 fiscal.
FDI in India was at $3.53 billion in March 2014. However, during 2014-15 financial year, foreign fund inflows grew 27%, year-on-year, to $30.93 billion as against $24.29 billion in 2013-14, according to the data of Department of Industrial Policy and Promotion. Amongst the top 10 sectors, services received the maximum FDI of $3.25 billion in 2014-15, followed by telecommunication ($2.89 billion) and automobiles ($2.57 billion).
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