By Md. Taraq Junaid
On January 4th, demonetisation claimed a fresh attack on the Indian Services sector. It provoked us to ponder over the widespread political propaganda justifying the bold and abrupt change. Business confidence slumped to the third-lowest level in its eleven-year history. This only reiterates the need for reforms in the formulation of economic policies in our country.
In December 2016, the business activity contracted for a second consecutive month following the decision in November. The Nikkei India Services Purchasing Managers’ Index (PMI), which tracks the service sector companies on a monthly basis, fell to 46.7 in November and to 46.8 in December from October’s 54.5. A reading above 50 indicates economic expansion, while a reading below 50 points indicates contraction. The PMI deals with various aspects related to inventory, production, demand and supply of products.
An economist at IHS Markit
When will business confidence be revived?
The Nikkei India Composite PMI Output Index, which maps both manufacturing and services sectors, stood at 47.6 in December when compared to 49.1 in November.
Although an improvement in the level of business activity is expected over the next few months, it is extremely hard to predict.