Covid-19: India's services PMI improves from April lows to 12.6 in May

Services activity in the country has suffered a lot amid back-to-back nationwide lockdowns to prevent the spread of coronavirus.

India's services activity, after suffering a shock collapse to an unprecedented low level in April, recovered marginally in May 2020, showed IHS Markit Services Purchasing Managers’ Index (PMI) numbers released on Wednesday.

Even as the headline figure rose from April's all-time low of 5.4, it remained at 12.6 during May, a level unparalleled in over 14 years of data collection, barring the recent months that have been impacted by the coronavirus pandemic. The numbers in April and May point to an extreme drop in services activity across India, mainly due to the nationwide lockdown imposed to prevent the spread of the virus.

A PMI reading above 50 denotes expansion, while one below that level implies contraction in activity. India, which first went for a nationwide lockdown on March 24, has seen the restrictions being extended four times since. At present, a fifth phase of lockdown is in force only in demarcated containment zones.

With the coronavirus lockdown crippling global demand, there has been a historic spike in layoffs, reinforcing fears of a deep recession in the country, the PMI survey showed.

The outlook gave little hope for an imminent turnaround with firms reporting record low levels of confidence about the next 12 months, reported Reuters.

"Given the stringency of the lockdown measures imposed in India, it is no surprise to see the severity of the declines in April and May," Joe Hayes, an economist at IHS Markit, said in a release.

"Demand for services, both domestically and overseas, continued to plummet in May as clients' businesses remained closed and footfall remains drastically below normal levels."

A composite PMI, which includes manufacturing and services, also signalled a severe contraction in Asia's third-largest economy.

"With economic output set to fall enormously in the first half of 2020, it is clear that the recovery to pre-COVID-19 levels of GDP is going to be very slow," IHS Markit's Hayes wrote, according to Reuters.