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Services sector continued to expand in September, hiring resumed – Mint

Indian service sector continued to expand in September as the loosening of Covid-19 restrictions supported an improvement in market conditions and overall demand, a private survey showed on Tuesday. 

India’s services industry expanded for a second straight month in September, bolstered by improved domestic demand and easing COVID-19 restrictions, pushing firms to hire more employees for the first time in nearly a year, PMI Survey by IHS Markit suggested.

The IHS Markit Services Purchasing Managers’ Index eased to 55.2 in September from August’s 18-month high of 56.7, but stayed comfortably above the 50-mark separating growth from contraction. The survey stated that employment at the composite level stabilised in September, after contracting in each of the prior 18 months. 

With the pandemic receding, there was a boost to consumer footfall. This, coupled with marketing efforts, reportedly supported another increase in new business inflows. Despite easing from August, the rate of expansion was marked and the second-fastest since February 2020, it stated.

“Indian companies continued to benefit from a recovery in demand as the pandemic receded further and restrictions were lifted,” said Pollyanna De Lima, economics associate director at IHS Markit. “The improved market environment meant that companies managed to secure new work and increase business activity during September.”

The new business sub-index was in expansion territory for a second month, albeit at a lower level, supported by higher sales and increased footfall as authorities eased limitations.

Business expectations remained positive on hopes the pandemic would continue to retreat and restrictions ease, but the outlook was muted by concerns over high inflationary pressures.

New jobs were created in the service sector, breaking the nine-month sequence of layoffs. However, the rate was fractional as firms handled the increased demand with the existing workforce while also running down backlogs of work.

“Employment returned to growth territory, posting the first rise since the onset of the pandemic, suggesting that the rebound in demand is expected to be sustained and that further increases in business activity are in the pipeline,” added De Lima.

De Lima further said that while forecasts of better demand in the year ahead supported business confidence regarding output, growth looks set to be constrained by rising inflation expectations.

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