India's service sector recorded largest contraction in business activity and new orders in April.
Services PMI: India’s service sector recorded its largest on-month contractions in business activity and new orders on record. As the nationwide lockdown brought the businesses to a standstill in April, the services PMI fell to a mere 5.4 in April, indicating the most severe contraction in services. The services PMI fell to 49.3 in March after 6 months of the continuous rise and from an 85-month high of 57.5 in February. The IHS Markit report highlighted that the restrictions on movement across the country contributed to the steep drop in new orders and demand for services in 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. Historical comparisons with GDP data suggest that India’s economy contracted at an annual rate of 15% in April,” said Joe Hayes, Economist at IHS Markit. Even as the economic damage of the COVID-19 pandemic has so far been deep and far-reaching in India, the hope is that the economy has endured the worst, and things will begin to improve as lockdown measures are gradually lifted, Joe added.
The services PMI is based on business activity, new business, new export business, outstanding business, prices charged, input prices, employment, and future activity. The PMI index is a perception of how the sector will perform. The reading can vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease.
Meanwhile, the manufacturing PMI stood at a mere 27.4 in April, which was 51.8 in March. The data has pointed to the sharpest deterioration in business conditions across the sector since data collection began over 15 years ago. Record contractions in output, new orders, and employment also led to a severe deterioration in demand conditions.