New Delhi: India has seen a massive crash in the dominant services industry last month which indicates a huge reduction in its economy during its stern physical distancing and stay-at-home measures given to the citizens.
“The services purchasing managers index speeds down by 43.9 points to 5.4 in April, the lowest in the world, hitting single digits for the first time and staying below 50, the dividing line between contraction and expansion”, as per the data published on Wednesday by IHS Markit. More than half of India’s GDP comes from the service sector.
“The manufacturing companies too on the low with their activities, the composite index plummeted to 7.2 from 50.6 in March, IHS Markit said. Historical comparisons of the index with Gross domestic product suggest the economy contracted at an annual rate of 15% in April,” it said.
The first signal of the devastating economy came into light after the PMI figures were shown from the lockdown exerted due to the coronavirus virus lasting since the last week of March. Large wrap of people were left on the mere existence with the number of them losing their jobs going to a mindboggling 122 million in April, most of which were daily wage earners.
“Growth in India is clearly under siege,” ANZ Banking Group economists Rini Sen and Sanjay Mathur wrote in a note to clients on Wednesday. “We expect the services sector to struggle as more people socially contain themselves even after the lockdown has been fully lifted.”
PMI surveys across the world are showing slimming down to a great degree in the manufacturing and services division. The U.K.’s services PMI plummeted to its lowest since the survey began in 1996, while survey results for several Asian countries earlier this week showed record plunges in factory output.“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,” Joe Hayes, an economist at IHS Markit, wrote in the release.
Zero-car sales in India have come to be the data suggesting for a sharp contraction this year in Asia’s third-largest economy. Bloomberg Economics’ Abhishek Gupta expects GDP to shrink by nearly 25% in the April-June quarter from a year ago, and 4.5% for the fiscal year through March 2021. Standard Chartered Plc is projecting a 2% contraction for the year.
With the government lifting the restrictions in some states and easing a few in various segregated zones, several of the industrially powerful states like Maharashtra, Gujarat, are still in the wrap of the virus infection. While India’s top 10 Coronavirus affected states contribute 66% to the country’s GDP, Kaushik Das, Deutsche Bank AG’s chief India economist, wrote in a report last week.
Prime Minister Narendra Modi is facing a severe monetary crunch, limiting his government’s ability to deliver meaningful spur to the economy. The virus relief package received so far has amounted to about 0.8% of GDP. The Reserve Bank of India has been left to do the heavy lifting in supporting growth through interest rate cuts and inserting more than $50 billion into the banking system.
