Mumbai // Economic activity in India’s services sector edged up last month, although companies froze hiring amid continued weak demand, according to a survey released yesterday.
The HSBC services purchasing managers’ index rose to 47.2 in November from 47.1 in October. A reading below 50 is a contraction, while the opposite represents expansion.
“Triggering the latest fall in service sector output was a fifth consecutive monthly drop in new work,” HSBC said.
“The overall rate of contraction was moderate and little changed from that seen in October.
“Evidence from survey participants highlighted weaker demand, competitive pressures and tough economic conditions.
“Across the private sector as a whole, order books fell for the fifth successive month, but at the weakest pace in this sequence.”
The survey revealed that companies in the Indian services sector were cautious about hiring last month “as payroll numbers were broadly unchanged from October”.
Sonal Aurora, managing director of the recruitment firm Perfman HR, said sectors such as banking, financial services, insurance and telecommunications had been buffeted by India’s economic slowdown.
“There are a lot of people who say that hiring is slow, there are still elections and everything,” said Ms Aurora. “But it depends on which sectors you’re working in and what levels are you’re working at.”
She said there was increased hiring at her company in the retail sector in the current quarter compared with the previous quarter.
“There’s an upward trend already starting,” she said, citing factors such as India’s young population and rising spending power, which would help to drive growth.
Meanwhile, the hotels and restaurants sector suffered the sharpest drop in new business and output, according to the HSBC survey findings.
Leif Eskesen, HSBC’s chief economist for India and Asean, said service sector activity remained subdued, but would at least appear to be stabilising.
The data reinforces economists’ views that while there are signs of improvement in India’s economy, there is still a long way to go.
A survey released on Monday showed that India’s manufacturing activity returned to growth in November for the first time in four months.
The HSBC manufacturing purchasing managers’ index for India rose to 51.3 last month from 49.6 in October. That followed a better than expected GDP reading for India, released on Friday. Official data showed that the economy grew 4.8 per cent in the July to September quarter, up from 4.4 per cent in the previous quarter.
India has been struggling with slowing economic growth, high inflation levels and a weak currency.
Economists say that the domestic economic downturn seems to be bottoming out, although a sustained recovery could be difficult over the coming months. That is because the investment climate remains subdued amid political uncertainty ahead of the general elections in May, while projects have stalled because of bureaucratic hurdles.
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In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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