Service activity contracts in March
NEW DELHI: Activity in the country key contracted in March and fell to a five-month low as the ravages in demand in foreign markets unleashed, and discretionary spending was affected by measures aimed at stopping the outbreak, a survey showed.
The Commercial Activity Index for Indian Services registered 49.3 in March, below the February 85-month high of 57.5. The headline figure fell by more than eight points, undoing strong gains in the growth momentum seen throughout 2019. Companies say they fear job losses, a sharp drop in earnings and earnings and overall demand. Airlines, travel and tourism, hospitality and retail have been the hardest hit.
“The impact of the global Covid-19 pandemic on India's service economy has not yet been fully realized. March PMI data showed that business activity declined slightly. However, the survey data collection (March 12-27) was wrapping up just as Prime Minister Modi ordered a total closure of the country, said Joe Hayes, economist at IHS Markit, the strong growth momentum seen so far in 2019 it stopped in March as demand conditions deteriorated, particularly abroad, leading to a reduction in commercial activity. Clearly, the worst is yet to come, as the closure of stores across the country and a ban on leaving the house will weigh heavily on the service economy, as seen in other parts of the world. The pressure now falls entirely on the government to combat the economic challenges that the blockade will cause, Hayes said.
The survey data pointed to the first drop in order book volumes for Indian service providers since September 2019. Although the drop in demand was modest, it was the sharpest in just over two years. There were widespread reports of new business revenue struggling due to the Covid-19 outbreak, which deterred discretionary spending.