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India Service Sector Shrinks In March On COVID-19 Outbreak

(RTTNews) - India's service sector deteriorated in March as demand shrunk amid the COVID-19 outbreak, survey data from IHS Markit showed on Monday.

The services Purchasing Managers' Index fell to 49.3 in March from February's 85-month high of 57.5. A score below 50 indicates contraction.

The survey data was collected between March 12 and 27. The country imposed a lockdown on March 23.

Order book volumes dropped for the first time since September 2019, which was the sharpest fall in over two years. New business decreased in March due to the COVID-19 outbreak.

Foreign demand deteriorated at the sharpest pace since September 2014 due to poor conditions in markets abroad.

The employment level decreased as firms reduced the number of workforce to keep operating costs tight. However, the rate of job shedding was mild as about 93 percent of firms left payroll counts unchanged.

Backlogs of works rose slightly in March, though at a weaker rate.

Confidence level was the lowest in five months in March though firms were optimistic that activity levels would increase over the next twelve months as the measures to control the spread of COVID-19 are lifted and global demand begins to recover.

Input costs increased at the slowest pace in six months in March. Output charges rose at a softer pace and were below its long-run average.

The composite output index to decreased to 50.6 in March from 57.6 in the previous month. The manufacturing PMI had shown a solid growth in output.

"Clearly the worse is yet to come as nationwide store closures and prohibition to leave the house will weigh heavily on the services economy, as has been seen elsewhere in the world," Joe Hayes, economist at IHS Markit, said.

"Pressure now fully lies on the government to combat the economic challenges the lockdown will cause."
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