India's service activity collapses as coronavirus accelerates global economy: PMI
BENGALURU: India collapsed in April when the coronavirus blockade paralyzed global demand, causing a historic spike in layoffs and reinforcing fears of a deep recession in Asia's third-largest economy, a private survey showed.
The grim result for industry, the engine of economic growth and jobs, underscored the pandemic's radical impact across India as authorities extended a national blockade, in effect from March 28 to May 17.
The Nikkei/IHS Markit Service Procurement Managers' Index fell to a staggering 5.4 in April from 49.3 in March, an unprecedented contraction since the survey began more than 14 years ago.
It also broke the forecast of 40 in the Reuters poll and was a long way from the level of 50 that separates growth from contraction, with the single-digit result by far marking the most extreme result among the major economies.
The extreme drop in the headline index, which fell by more than 40 points, shows us that strict blockade measures have brought the sector to a complete halt, Joe Hayes, economist at IHS Markit, said in a statement.
The sharp drop in activity underscored the widespread chaos caused by the pandemic across the world, and many fear the worst global recession since the 1930s.
All the key indicators in the survey plummeted. An index that measures foreign demand for services was no longer at an unprecedented 0.0, while an overall demand index also fell to a record low and companies fired workers at the fastest time.
The latest findings came immediately after a sister poll on Monday showing the factory's activity contracted at its fastest recorded pace.
That, combined with a free-falling service sector, dragged the composite PMI to a record low of 7.2 last month from March 50.6 and signaled a crippling economic hit.
A Reuters poll showed the Indian economy is likely to experience its worst quarter since the mid-1990s in the April-June quarter, contracting by 5.2%.
The economic shock is likely to put pressure on Prime Minister Narendra Modi to reveal new measures, but the government has limited fiscal policy space to respond to the crisis.
The RBI has already reduced its repurchase rate and reverse repurchase rate by 75 basis points and 115 cumulative basis points respectively since the government-imposed shutdown.
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 from the COVID-19 pandemic so far has been deep and far-reaching in India, Hayes of IHS Markit said. said.
But the hope is that the economy has suffered the worst and things will start to improve as the closure measures are gradually lifted.
The poll pointed to a long, difficult road ahead as optimism for the next 12 months fell to the lowest in more than four years.
As of Tuesday, India had recorded more than 46,000 coronavirus cases and more than 1,500 deaths. However, the true scope of infections may be much greater in a country where millions of people do not have access to sufficient medical care.