GST pulls down July services PMI to 45.9, lowest level since Sept 2013

The introduction of the Goods and Service Tax (GST) has pushed down activity in the services sector to a nearly four-year low in July even as manufacturing activity reels at an eight-and-a half-year low. 

The widely-tracked Nikkei Purchasing Manager Index (PMI) on Thursday showed that PMI for the dominating sector of the Indian economy plunged to 45.9, its lowest level since September 2013. At an eight-month high, PMI had been 53.1 in the previous month of June.

The 50-point mark separates expansion from contraction.

Output and new work declined for the first time since January, with rates of reduction the quickest since September 2013. This had an adverse effect on the labour market, with employment contracting over the month. Likewise, factory orders decreased in July, and at the quickest pace since February 2009.

According to survey participants, confusion over GST was mentioned by services firms as having caused a contraction in new work, leading to lower activity. This is in stark contrast to improving demand conditions and marketing efforts leading to a higher share of new work over the past four months.