Services PMI shrinks as Omicron takes a toll

Delhi: India's services sector activity moderated further in January as new business rose at a noticeably slower rate amid the escalation of the pandemic, reintroduction of restrictions and inflationary pressures, a monthly survey said on Thursday.

The seasonally adjusted India Services Business Activity Index fell to 51.5 in January, down from 55.5 in December, pointing to the slowest rate of expansion in the current six-month sequence of growth.

For the sixth straight month, the services sector witnessed an expansion in output. In Purchasing Managers' Index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction. According to survey participants, demand was restricted by the fast spread of the Omicron variant and the reinstatement of curfews in parts of the country.

"The escalation of the pandemic and reintroduction of curfews had a detrimental impact on growth across the service sector. Both new business and output rose at slight rates that were the weakest in six months," said Pollyanna De Lima, Economics Associate Director at IHS Markit. Companies became increasingly worried that growth would be harmed by the intensification of the pandemic, reintroduction of restrictions and inflationary pressures. Business sentiment remained positive but slipped to a six-month low. "Concerns about how long the current wave of COVID-19 will last dampened business confidence and caused job shedding. Firms were also alarmed about price pressures," Lima noted.