The services PMI recorded 49.3 in March, falling from February's 85-month high of 57.5.
After four months of the continuous rise and over 7-year high level in February, services PMI dramatically contracted in the month of March due to deteriorating global demand. The services PMI recorded 49.3 in March, falling from February’s 85-month high of 57.5, said the IHS Markit report. Coronavirus-led disruptions in the overseas market have drastically hit foreign demand, which fell the most since September 2014. The lockdowns across the world have also hurt the ability of firms to source new businesses from abroad. In response to reduced business requirements, the level of employment across the Indian services sector fell as firms cut workforce numbers to keep operating costs under control.
The services PMI is based on the performance of the business activity, new business, new export business, outstanding business, prices charged, input prices, employment, and future activity. Meanwhile, the survey conducted doesn’t take into account the effect of the lockdown hence it is expected that the services activity in the coming months may further fall. While businesses are shut and people are locked in homes, the demand has already floored.
“The impact of the global COVID-19 pandemic on India’s services economy has not been fully realised yet. March PMI data showed business activity falling mildly. Crucially, however, the survey data collection (12-27 March) was concluding just as Prime Minister Modi ordered a complete lockdown of the country.” said Joe Hayes, Economist, IHS Markit. Clearly the worse is yet to come as nationwide store closures and prohibition to leave the house will weigh heavily on the services economy, as has been seen elsewhere in the world, Joe Hayes added.