Lockdown pulls India's service sector activity to standstill in Apr; PMI hits record low

India's service sector activity plummeted to a historic low in April, as strict restrictions on the movement of citizens and business shutdowns led the sector to a complete standstill, a monthly survey said on Wednesday.

The IHS Markit India Services Business Activity Index stood at 5.4 in April, an extreme decline from 49.3 in March, and indicative of the most severe contraction in services output since records began in December 2005.

As per the IHS Markit India Services Purchasing Managers' Index (PMI), a print above 50 means expansion, while a score below that denotes contraction.

According to panellists, activity fell severely as a result of the nationwide lockdown, leading businesses to shut down their operations as demand collapsed.

"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," said Joe Hayes, Economist at IHS Markit.

Meanwhile, the Composite PMI Output Index, which measures combined services and manufacturing output, sank to 7.2 in April from 50.6 in March, signalling the worst contraction in economic activity since data collection began in late-2005, Hayes said.

Moreover, international sales fell across the entire survey panel in April, as signalled by the respective index falling to 0.0.

According to firms, measures to stem the spread of the virus overseas had caused demand to fall across all key export markets.

"Historical comparisons with gross domestic product (GDP) data suggest that India's economy contracted at an annual rate of 15 per cent in April.

"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.

On employment, the survey said owing to lower business requirements, some services companies reduced employment at the start of the second quarter.

"While the rate of job shedding was a survey record, approximately 90 per cent of respondents reported unchanged workforce numbers," the survey noted.

On the prices front, the survey said input and output prices fell when compared to March, although respective rates of deflation were stronger at manufacturers than service providers.

Going ahead, the latest survey data signalled a further erosion of business confidence in April. Expectations towards future output slumped for a second successive month to their weakest since December 2015, the survey noted.

The nationwide lockdown to contain the spread of coronavirus infections began of March 25.

The number of COVID-19 cases in India climbed to 49,391 in the country on Wednesday, and the death toll rose to 1,694, according to the Health Ministry.