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Modi Wave' Boosts India's Services Activity -- HSBC

Modi Wave' Boosts India's Services Activity -- HSBC

07/03/2014

 By Anant Vijay Kala 

NEW DELHI--India's services sector activity jumped in June thanks to a surge in new orders, in one of the first clear signs of a wave of business optimism generated by the country's new prime minister, Narendra Modi.

The seasonally-adjusted Service Sector Business Activity Index rose sharply to a 17-month high of 54.4 from 50.2 in May, according to a HSBC index released Thursday. A figure above 50 indicates expansion while one below 50 points to a contraction.

"After months of subdued activity, the Modi wave has struck the service sector and lifted growth," HSBC joint head of Asian economic research Frederic Neumann said.

HSBC said new orders received by service providers rose at the fastest pace since February last year. Output expanded in four of the six business segments tracked in the survey, with post and telecommunication as well as renting activities showing the strongest gains.

The Indian economy has slowed sharply in recent years with its growth slipping to sub-5% levels from nearly 9% as recently as in 2011 as high inflation, lagging infrastructure development and delayed revamping of business policies hurt investor confidence.

The services sector, which contributes about 60% to India's gross domestic product, has also been badly hit with activity shrinking for 10 months in a row until April.

But the landslide victory for Mr. Modi and his Bharatiya Janata Party in national elections concluded in May has given hope the new government would speed up policy changes needed to revive economic growth and attract investors back into the once-shining economy.

"Some of this is simply pent up demand being unleashed," Mr. Neumann said. "As we move along, faster reforms due to political stability should fuel the momentum."

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