India’s services sector, which contributes to more than half of the nation’s gross domestic product, reported its lowest level in the world, accelerating the fears that the economy is headed for a recession as the nationwide lockdown has shut businesses and kept consumers indoors.
The services Purchasing Managers’ Index (PMI) for India fell to an unprecedented 5.4 in April from 49.3 in March, the sharpest decline in services activity since IHS Markit started collecting the data in December 2005. A reading lower than 50 shows that the activity is shrinking.
The data reported on Wednesday indicates services have shown poorer performance than the manufacturing sector. Data revealed last week showed manufacturing PMI fell to a record low of 27.4 in April from 51.8 in March.
The data presents a sad state of the economy, which by many economists’ estimates is likely to contract for the first time in more than four decades.
“Historical comparisons with GDP (gross domestic product) data suggest India’s economy contracted at an annual rate of 15% 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 the economy has endured the worst and things will begin to improve as lockdown measures are lifted,” said Joe Hayes, an economist at IHS Markit.