Business activity across India's service sector fell drastically during May as the unfavourable economic effects of the coronavirus disease 2019 (Covid-19) pandemic impaired business operations, restricted consumer footfall and led demand to collapse, according to the latest Purchasing Managers' Index (PMI) data.
While most measures came off the unprecedented lows seen in April, survey data still pointed to extreme month-to-month declines in output and new orders.
Spare capacity continued to rise, albeit to a far lesser degree than in May as prolonged shutdowns led to a rise in incomplete work at some companies. Meanwhile, employment continued to fall in response to weak demand and expectations of further challenging conditions.
The IHS Markit India Services Business Activity Index recorded 12.6 in May. Although the headline figure rose from April's unprecedented low of 5.4, it remained at a level which, prior to the coronavirus pandemic, was unparalleled in over 14 years of data collection and pointed to an extreme drop in services activity across India.
According to panel member reports, output sank sharply due to extended business shutdowns and very weak demand conditions. Latest survey data pointed to a substantial decline in new work intakes at Indian service providers during May.
Measures imposed to stem the spread of COVID-19 were a key reason behind the latest drop in sales, as per anecdotal reasons. The rate of decrease was marginally softer than seen in April, but was nonetheless steep by historical comparisons.
"Given the stringency of the lockdown measures imposed in India, it is no surprise to see the severity of the declines in April and May," said IHS Markit Economist Joe Hayes.
Demand for services, both domestically and overseas, continued to plummet in May as clients' businesses remained closed and footfall remains drastically below normal levels, he said in a statement.
"With economic output set to fall enormously in the first half of 2020, it is clear that the recovery to pre-COVID-19 levels of GDP is going to be very slow," said Hayes.
The IHS Markit India Services PMI is compiled from responses to questionnaires sent to a panel of around 400 service sector companies. The sectors covered include consumer (excluding retail), transport, information, communication, finance, insurance, real estate and business services.
The panel is stratified by detailed sector and company workforce size based on contributions to GDP.
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