India's service sector recorded its largest month-to-month contraction in business activity and new orders since data collection began over 14 years ago, in April, according to the latest PMI data released on May 6. Measures to stem the spread of the coronavirus disease 2019 (COVID-19), such as restrictions on the movement of citizens and business shutdowns, were the key factors causing output and demand to fall at unprecedented rates.
The news release by IHS Markit India Services PMI stated that the impact of the global pandemic was particularly striking in export markets, with the entire survey panel registering lower overseas sales.
The IHS Markit India Services Business Activity Index posted 5.4 in April, an extreme decline from 49.3 in March, and indicative of the most severe contraction in services output since records began in December 2005. According to panellists, activity fell severely as a result of the nationwide lockdown, leading businesses to shut down their operations as demand collapsed. Approximately 97% of survey respondents observed a reduction in output, highlighting the widespread impact of the COVID-19 pandemic.
The release further stated that the restrictions on movement across India contributed to the steep drop in new orders during April. Demand for services fell at the sharpest rate in over 14 years of data collection. Some panel members mentioned that key clients closing their businesses had also severely hit workloads.
International sales fell across the entire survey panel in April, as signalled by the respective index falling to 0.0. According to firms, measures to stem the spread of the virus overseas had caused demand to fall across all key export markets.
The Composite PMI Output Index, which measures combined services and manufacturing output, sank to a new record low in April. At 7.2, the index fell from 50.6 in March and was indicative of an unprecedented decline in private sector business activity. The latest reading was the smallest by some margin, eclipsing the previous low seen in February 2009.
"The Indian services economy posted its worst-ever month-on-month drop in business activity during April," said Joe Hayes, Economist at IHS Markit. "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," he said.
The IHS Markit India Services PMI is compiled from responses to questionnaires sent to a panel of around 400 service sector companies. IHS Markit is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide.
(With ANI inputs)