NEW DELHI: Activity in the country’s crucial services sector slumped to a record low in April as the Covid-19 pandemic and the strict lockdown unveiled by the government shut out demand, a survey showed on Wednesday, highlighting the mayhem in the sector.
Latest PMI data for April showed the services sector recorded its sharpest month-on-month contractions in business activity and new orders since data collection began over 14 years ago. The impact of the global pandemic was particularly striking in export markets.
The IHS Markit India Services Business Activity Index posted a reading of 5.4 in April, a sharp decline from 49.3 in March, and indicative of the most severe contraction in services output since records began in December 2005. The 50-point mark separates expansion from contraction.
The latest data comes against the backdrop of the manufacturing sector PMI, which also plummeted to a record low. The Covid-19 pandemic and the lockdown announced to stem the spread of the disease has prompted restaurants, hotels, the hospitality sector and airlines to shutter businesses. This has also led to massive job losses. Most economists and multilateral agencies expect the economy to grow in the range of 0-2% in 2020-21 and recover to 6.5% to 7% levels next year.
“The Indian services economy posted its worst ever month-on-month drop in business activity during April. 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.
As a result of 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.
Looking ahead, latest survey data signalled a further erosion of business confidence in April. Expectations towards future output slumped for a second successive month to their weakest since December 2015. According to panel comments, expectations of a protracted decline in the economy weighed on sentiment.
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Activity in services sector dives to record low in April - Times of India
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