India’s services PMI drops to 4-year low due to GST

The Nikkei India Services PMI Business Activity Index dropped to 45.9 in July, lowest since September 2013.

The Dollar Business Bureau 

India’s services sector activities declined in July to a four-year low due to the disruptions caused by the implementation of Goods and Services Tax (GST), according to a private survey. However, the sector is confident of a speedy revival as the new indirect tax regime settle down.  

The Nikkei India Services PMI Business Activity Index dropped from the eight-month high of 53.1 in June to 45.9 in July, the lowest since September 2013. 

A reading over the level of 50 on the index indicates expansion whereas a reading below the halfway level shows contraction.  

“PMI data for July highlight a reversal in fortunes across India, with the economy going into reverse mode after seeing a pickup in growth momentum during June,” said Pollyanna De Lima, Economist at IHS Markit and author of the report.  

Earlier in the week, data released displayed a steeper drop in the manufacturing PMI to a low of eight-year in July because of GST-related changes in manufacturing.  

The Nikkei/IHS Markit composite PMI, which measures manufacturing as well as services activity, dropped to 46 — the lowest level since March 2009 — from eight-month high of 52.7 in June.  

A latest official data also showed not too positive growth of core sector, which slows down to a 19-month low with 0.4% growth in June.  

Apart from finance and insurance services, the other key sectors such as consumer services, information and communication services, transport and storage services, and real estate and business services, witnessed contraction in the new business. 

While the firms stated lack of proper knowledge about GST for the slow growth, they are expecting more clarity in the coming months to lead to growth in activity.