India's Service Sector Activity for the Year Grows at the Fastest Pace in June

The Nikkei India Services Business Activity Index climbs to 52.6 in June 2018 from 49.6 in May, as per the statement released by research firm IHS Markit. The service sector contributes up to 60 percent in India's Gross Domestic Product (GDP).

June's reading this year is the highest since June last year when it was at 53.1. Below 50 is considered as a contraction in activity whereas over 50 is an indicator of expansion.

Job growth was also reported to be higher compared to the five-month low in May. The Nikkei India Composite PMI Output Index, released earlier this week was higher at 53.3 in June from 50.4 in May. It has been the highest reading since October 2016, due to the strong growth in the key manufacturing and services sectors.

However, inflation pressure has been building on the manufacturers that have been suspected to be caused by higher fuel costs. The IHS Markit survey said that the service providers "raised their output charges at the slowest pace in over a year," as they could not fully pass the burden on to the price-sensitive consumers.

Business sentiment across the service sector is at the lowest since October 2017. Manufacturing companies are also reportedly showing weaker confidence about business for the 12-month outlook.