India's service activity crashes to historic lows as the country extends lockdown to fight coronavirus

Associated PressAn Indian policeman wearing a virus themed helmet rides on a horse during an awareness rally aimed at preventing the spread of new coronavirus in Hyderabad, India, Thursday, April 2, 2020. The new coronavirus causes mild or moderate symptoms for most people, but for some, especially older adults and people with existing health problems, it can cause more severe illness or death. (AP Photo/Mahesh Kumar A.)
  • India’s economy descended to a new low in April with its service industry activity tanking to a level far worse than any observed measure since records began 15 years ago, according to IHS Markit’s index released Wednesday.
  • IHS Markit’s India Purchasing Managers’ Index (PMI) for the service sector posted a bleak reading of 5.4 in April, significantly down from 49.3 in March.
  • A PMI reading of above 50 indicates an expansion in economic activity, while a reading below 50 implies a contraction. Even during economic downturns readings tend not to dip below 45.
  • A measure tracking India’s foreign sales fell to an unprecedented 0.0 reading, as demand across export markets ground to a halt.
  • On Monday, liquor stores were allowed to temporarily reopen across India and a key state raked in $US25 million in alcohol sales on a single day.
  • Visit Business Insider’s homepage for more stories.

India’s service industry recorded an “extreme decline” in April after nationwide lockdown restrictions were implemented to curb the spread of the coronavirus, IHS Markit said.

The IHS Markit India Services Business Activity Index posted a grim reading of 5.4 last month – a terrifying decline from 49.3 in March. The sharp plunge in service business activity indicates a severe contraction in the Indian economy since records began 15 years ago.

IHS Markit attributed the scale of collapse to movement restrictions and shutdowns to business, which resulted in an unprecedented fall in output and demand.

“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,” said Joe Hayes, an economist at IHS Markit, in a statement.

About 97% of the respondents to the Purchasing Managers Index (PMI) survey pinned the crippling impact on their businesses to a reduction in output caused by the Covid-19 pandemic.

India's service sector activity plummets at historic rate during AprilIHS MarkitIndia’s service sector activity plummets at a historic rate in April.

The PMI is an economic indicator to gauge the economic direction of services trends in the economy. A reading of 50 implies that the economy is going through a neutral or stabilised level of growth in the service industry, above 50 exhibits expansion, and below 50 indicates stagnation.

More often than not, during periods of economic expansion, PMIs hover in the mid-50s range, while during downturns readings as low as 45 can be expected.

As things stand, India’s latest service level activity is catastrophic.


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An index measuring foreign demand for services fell to an unparalleled level of 0.0, as demand across key export markets ground to a halt.

The international sales index and the services PMI drastically pulled down the weight of the composite index.

The composite output PMI – which considers all sectors of the economy – sank to a new record low of 7.2 from 50.6 in March, underlining a blow to the paralysed private sector. The previous such low was recorded in February 2009.

Booming sales for liquor stores

Starting Monday, Prime Minister Narendra Modi’s government reportedly relaxed restrictions on the production, sale and transport of goods in districts deemed relatively safer from the virus.

Liquor shops were allowed to open temporarily on Tuesday after the government sanctioned alcohol sales during the lockdown, in order to increase the flow of revenue. States also imposed a 70% tax on the sale of alcohol.

According to multiple reports, large crowds gathered near liquor stores without following social distancing norms as people feared shops may shut soon.

This week, liquor stores in safe zones registered booming sales across the country, with one state raking in about $US25 million in a single day, as per the Times of India.

So far, India has recorded 49,436 confirmed coronavirus cases and 1,695 fatalities.


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