Services PMI falls to a historic low of 5.4 points

India’s services sector, which contributes more than half to the country’s GDP, suffered the worst contraction, falling to 5.4 points in April from 43.9 in March, according to Nikkei/IHS Markit PMI, which said historical comparisons of index with GDP data suggests India’s economy contracted 15% in April.

The April services index was worst ever and way off the 50-point mark that separates growth from contraction. For India this is the sharpest contraction on record and comes on the back of a historic low manufacturing PMI of 27 points 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,” Joe Hayes, an economist at IHS Markit, said in a release.

“Historical comparisons with GDP data suggest that India’s economy contracted at an annual rate of 15% in April. It is clear that the economic damage of the COVID-19 pandemic has so far been deep and far-reaching in India,” Hayes said. However, he hoped that the economy had endured the worst, and things will begin to improve as lockdown measures are gradually lifted.

The manufacturing PMI combined with services sector fall, dragged the composite PMI to an all-time low of 7.2 in April from 50.6 in March.

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, Hayes said.

The PMI data came on the back of zero car sales in April by companies operating in India and the country’s unemployment rate surging over 27% for the week ended May 3 from 6.74% in the week ended March 15 amid suspended economic activities, according to Centre for Monitoring Indian Economy (CMIE).