India's services sector outlook better: HSBC Index

India's services sector, the backbone of the country's economy grew at a marginally slower pace in June even as significant rise in new orders may "hold up" activity in the coming months, according an HSBC survey.
    
"While service sector activity grew at a slightly slower pace, new orders grew faster and this should hold up activity in coming months,"  HSBC Chief Economist for India and ASEAN Leif Eskesen said in a statement.
     
The service providers also increased their staffing levels in June for the fourth month in a row and this in turn helped in the reduction of work backlog significantly.
     
While HSBC services purchasing managers index (PMI) fell to 54.3 in June from 54.7 in May, the globally well-known benchmark remained above the crucial 50 mark marking growth since November, eighth month in a row.
    
The composite PMI for both manufacturing and services sectors has shown a slight improvement at 55.7 in June against 55.3 in May,  registering the fastest expansion of output in four months.
    
But with inflation staying high at 7.55% in May and the composite PMI numbers showing improvement, it is hard build a strong case for the policy interest rate cuts in the near term, the survey pointed out.
    
In its mid-quarter monetary policy review on June 18, RBI chose to leave key interest rates on hold.
    
The manufacturing sector expanded at the fastest pace in four months in June as the country saw improvement in business conditions as well as hiring.
    
As a pointer for the coming 12 months, the business sentiments remained positive among the services companies in June.
    
As for inflation, the PMI survey found that both manufacturers as well as service providers continued to reel under pressures of price rise as high input costs were passed on to customers.
    
"Output prices have increased in the services sector in each month since November 2010. Composite data indicated that charges rose sharply in June, with the rate of increase the strongest since July 2008," noted HSBC.
    
The services sector accounts for more than 55% of the country's gross domestic product.
    
As per the government data,economic growth rate slowed to a 9-year low in March quarter at 5.3%, and 6.5% for the entire 2011-12 fiscal. The 2011-12 growth was lower than 6.7% seen in 2008-09 amid the height of global financial crisis.