Business conditions in India have deteriorated the most since the global financial crisis as the roll out of a nationwide sales tax disrupted supply and distribution links just months after Indian Prime Minister Narendra Modi’s cash ban roiled markets.
The Nikkei India Composite PMI Output Index fell to 46 last month from 52.7 in June, the steepest drop since March 2009, a report showed yesterday.
Activity in the key services sector plunged to 45.9 from from 53.1 — the lowest since September 2013 — after data showed manufacturing slumped the most since 2009.
A reading below 50 indicates contraction.
“Private sector activity dipped for the first time since the demonetization shock” and “most of the contraction was attributed to the implementation of the goods and services tax and the confusion it caused,” IHS Markit principal economist Pollyanna De Lima said in the report.
“Faced with fewer workloads, service providers and manufacturers lowered payroll numbers in July,” she said.
The data add to evidence of underlying weakness in one of the world’s fastest-growing economies.
The central bank on Wednesday cut rates to the lowest since 2010 and urged the government to speed up projects because there’s “an urgent need” to boost private investment.
However, rates of job shedding — while the fastest since early 2009 — were “slight overall,” according to the report.
Firms seem convinced that prospects will brighten as the GST regime becomes clearer, De Lima said.
In other related news, Germany’s economy slowed more than initially estimated at the start of the third quarter, leaving it trailing the euro region’s other large nations.
IHS Markit’s German composite Purchasing Managers Index for last month dropped to 54.7, down from 56.4 in June and missing the 55.1 flash reading.
That is a 10-month low and the first time in more than 12 years that the survey for Germany has lagged France, Italy and Spain.
The figures nevertheless indicate a solid quarterly growth of between 0.4 percent and 0.5 percent for the bloc’s largest economy.
In the euro area overall, the composite PMI fell to 55.7 last month, although the economy remains on track to sustain the speed of its expansion this quarter.
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Motorists ride past a mural along a street in Varanasi, India, yesterday.
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