MUMBAI, India – India’s key services sector plummeted last month, data showed on Wednesday, May 6, indicating a severe slowdown across Asia’s 3rd largest economy which has been under a lockdown for 6 weeks to tackle the coronavirus.
The services Purchasing Managers’ Index (PMI) fell from 49.3 points to 5.4 points in April, the sharpest contraction since record-keeping began in 2005, as the restrictions brought manufacturing, trade, and construction activity to a grinding halt.
The lockdown spurred millions of migrant workers to flee India’s cities, many of them on foot, as businesses stopped operations in March, dealing a huge blow to manufacturing and to the services sector, which contributes 54% of gross domestic product (GDP).
Measures imposed to slow the spread of the coronavirus including restrictions on movement and business shutdowns “were the key factors causing output and demand to fall at unprecedented rates,” a report from IHS Markit said.
A decline in manufacturing meant that the Composite PMI also plunged to a record low, sliding from 50.6 points in March to 7.2 points last month, the report said.
Historical comparisons of the figures with GDP data suggest that “India’s economy contracted at an annual rate of 15% in April,” said Joe Hayes, an economist with IHS Markit.
In more bad news for Prime Minister Narendra Modi, 122 million Indians lost their jobs last month, data from Mumbai-based think tank Centre for Monitoring Indian Economy showed, with small traders and daily wage earners accounting for the bulk of losses.
The figures have raised concerns about the prospects of recovery for the economy, which was already battling a liquidity crisis, bad loans, and rising unemployment even before the pandemic arrived in India.
India has so far recorded under 50,000 cases and fewer than 1,700 deaths related to the coronavirus, but experts say the country is not testing enough people.
Modi’s government in March announced an economic welfare package of 1.7 trillion rupees ($22.54 billion) to help its poorest citizens with direct cash transfers and food subsidies for 3 months to cope with the fallout of the lockdown.
The Reserve Bank of India has also cut interest rates to inject over $50 billion in liquidity into the system.
But analysts say the road to recovery will be extremely challenging.
“The government’s focus should be on…kick-starting small-scale economic activity,” Ashutosh Datar, an independent Mumbai-based economist, told Agence France-Presse. – Rappler.com