'Services growth at a three-month high'

In a significant upturn, services sector grew at its fastest pace in three months in July on surge in new business orders and low prices, a monthly PMI survey showed.

This raised hopes for a rate cut by RBI Governor Raghuram Rajan in his last monetary policy review next week.

The cut in prices showed that the inflationary pressure was muted, while job creation continues to remain subdued, leaving room for a parting gift from the outgoing RBI Governor in form of a reduction in interest rates to boost growth.

The Nikkei India Services Purchasing Managers’ Index (PMI), which tracks changes in activity at services sector companies on a monthly basis, increased to 51.9 in July, up from 50.3 in June.

“The Indian service economy started the second semester on a solid footing, posting its strongest performance since April and thereby indicating that underlying demand conditions remained reasonably firm,” said Pollyanna De Lima, economist at Markit, which compiles the survey.

With growth of manufacturing output also quickening, the seasonally adjusted Nikkei India Composite PMI Output Index climbed to a three-month high of 52.4 in July, against 51.1 in June.

A reading above 50 means the sector is expanding, while a reading below 50 means contraction.

Earlier on Monday, the PMI survey for manufacturing sector showed that the country’s factory output grew at its fastest pace in four months, which was also driven by surge in new business orders though pricing trends and job creation remained muted.