The IHS Markit India Services Business Activity Index plummeted at a historic rate during April, posting a shocking 5.4 points in comparison with the previous month’s 49.3. A reading below 50 on the scale represents contraction.
According to the IHS Markit report, last month’s reading was an “extreme decline” and “the most severe contraction in services output since records began in December 2005.”
Commenting on the data, Joe Hayes, economist at IHS Markit, said: “The Indian services economy posted its worst ever month-on-month drop in business activity during 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.”
Hayes added: “Historical comparisons with GDP data suggest that India’s economy contracted at an annual rate of 15 percent in April.”
Activity fell severely as a result of the nationwide lockdown, leading businesses to shut down their operations as demand collapsed. Restrictions on movement across India contributed to the steep drop in new orders during April.
International sales also plunged, as signaled by the respective index falling to 0.0. According to some firms, measures to stem the spread of the virus overseas caused demand to fall across all key export markets.
Expectations towards future output slumped for a second successive month to their weakest since December 2015.
“It is clear that the economic damage of the Covid-19 pandemic has so far been deep and far-reaching in India, but the hope is that the economy has endured the worst and things will begin to improve as lockdown measures are gradually lifted,” said Hayes.
The Indian government imposed a nationwide lockdown in late March and has extended it twice since then. According to Reuters reports, the government could prolong the lockdown for another two weeks.
There are around 50,000 confirmed cases of coronavirus infections in India, resulting in 1,700 deaths.
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