Services shrink in March
The headline figure fell over 8 points, undoing the strong gains in growth momentum seen throughout 2019, the survey said
- Published 7.04.20, 2:01 AM
- Updated 7.04.20, 2:01 AM
- a min read
The country’s services sector activity fell sharply in March, after rising for five consecutive months, as the Covid-19 outbreak dented client demand, particularly in the overseas markets, according to a private survey.
The IHS Markit Services Purchasing Managers’ Index fell sharply to a five-month low of 49.3 in March from February’s seven-year high of 57.5, below the 50-mark separating growth from contraction for the first time since October.
The headline figure fell over 8 points, undoing the strong gains in growth momentum seen throughout 2019, the survey said.
Incidentally, the details of the survey come a day after a CII CEO Snap Poll showed that majority of the respondents expected a significant decline in revenues, falling demand and job losses. The online survey saw a participation of around 200 CEOs across sectors.
“The impact of the Covid-19 pandemic on India’s services economy has not been fully realised yet… 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, economist at IHS Markit, said.
He said “the survey data collection (March 12-27) was concluding just as Prime Minister Narendra Modi ordered a complete lockdown of the country”.
The manufacturing Purchasing Managers’ Index (PMI) data for March, released last week, showed a decline to a four-month low of 51.8 from 54.5 in February.
According to IHS Markit, the latest survey data pointed to the first fall in the order book volumes of Indian service providers since September 2019. Though the drop in demand was modest, it was the sharpest for just over two years. Further, there were reports of new business receipts struggling because of the Covid-19 outbreak, deterring discretionary spending. A number of firms also mentioned lower sales as a result of liquidity issues.
Panel members also pointed out that business activity was reduced in response to weaker demand and firms responded by reducing their workforce as intakes of new business were insufficient to maintain payroll numbers.
“Pressure now fully lies with the government to combat the economic challenges the lockdown will cause,’ Hayes said.