Covid-19: India’s service sector fell to historic low in April amid lockdown, shows survey
The PMI by IHS Markit crashed from 49.3 in March to a grim 5.4 in April in one of the most severe contractions ever recorded.
India’s service sector activity nosedived to a historic low in April as the government took unprecedented steps to halt movement of citizens to contain the pandemic, bringing all economic activities to a standstill, according to the Nikkei India Manufacturing Purchasing Managers’ Index released by IHS Markit on Wednesday.
The monthly index crashed from 49.3 in March to a grim 5.4 in April in one of the most severe contractions in services output since records began in December 2005. A reading above 50 shows an expansion, while a lower reading indicates a contraction in manufacturing activity.
“The extreme slide in the headline index, which fell by over 40 points, shows us that the strict lockdown measures have led to the sector essentially grinding to a complete standstill,” said Joe Hayes, economist at IHS Markit. “Historical comparisons with gross domestic product data suggest that India’s economy contracted at an annual rate of 15% in April.”
In another historic collapse, the Composite PMI Output Index, which measures combined services and manufacturing output, sank to 7.2 in April from 50.6 in March.
Hayes said that it is clear the economic damage of the pandemic has “so far been deep and far-reaching in India”. However, he said there is hope the economy has endured the worst and things will begin to improve as lockdown measures are gradually lifted.
As governments around the world shuttered their economies and brought all movement to a halt to contain the Covid-19 infection, demand across all key export markets fell drastically, firms claim. The steep downturn in activity has ravaged economies worldwide, with many fearing the worst global recession since the 1930s.
An index measuring foreign demand for services ceased to an unprecedented 0.0, while an overall demand index also fell to an historic low and firms laid off workers at the quickest clip ever.
The survey said owing to lower business requirements, some services companies reduced employment at the start of the second quarter. “While the rate of job shedding was a survey record, approximately 90% of respondents reported unchanged workforce numbers,” it noted.
Input and output prices fell when compared to March, although respective rates of deflation were stronger at manufacturers than service providers, the survey observed.
The latest findings came two days after a sister survey on Monday showed factory activity contracted at its sharpest pace on record, according to News18. This combined with a services sector in freefall, dragged the composite PMI to an all-time low of 7.2 last month from 50.6 in March.
India’s coronavirus tally rose to 49,391 on Wednesday morning and the country recorded 1,694 fatalities, according to the figures from the health ministry.