NEW DELHI : India’s services industry, which accounts for more than half of the nation’s gross domestic product, contracted for a fifth straight month in July, although at a slightly slower pace than in the prior month, as sporadic regional lockdowns and weak demand constrained economic activity.
The purchasing managers’ index (PMI) for services inched up slightly to 34.2 in July from 33.7 in June, according to the survey by analytics firm IHS Markit. The reading was still well below the 50 mark that divides contraction from expansion.
India is nearing the 2-million mark in coronavirus cases, the third-highest in the world after the US and Brazil. More than 40,000 have died so far, prompting local authorities to impose lockdowns to stem the spread of the virus.
“Further substantial reductions in both activity and inflows of new work were recorded, as ongoing lockdown restrictions stifled demand and forced companies to cease operations. Subsequently, firms made further cuts to staff numbers, with the rate of job shedding the most marked on record. Looking ahead, the 12-month outlook for output was negative for a third successive month, with fears of a substantial economic downturn common among survey respondents," the analytics company said in a statement.
Data released by IHS Markit on 3 August showed India’s manufacturing PMI declined to 46 in July from 47.2 in the preceding month.
The coronavirus pandemic and subsequent introduction of lockdown measures continued to weigh heavily on the economy, Lewis Cooper, an economist at IHS Markit, said, adding that he estimates an annual contraction in India’s GDP of more than 6% in the current fiscal.
“July data, as a whole, provide no real signs that the downturn is slowing down. That’s not surprising with lockdown measures still in force, but undoubtedly these will have to be loosened and companies reopen before the sector can move towards stabilization. With such a prolonged and significant downturn, any substantial recovery will take many months, if not years," he said.
The finance ministry on Tuesday said India’s economic recovery will depend on how the pandemic behaves across the country in the coming days, especially in industrialized states. India’s top 12 growth-driving states account for 85% of the covid-19 caseload, with 40% of confirmed cases concentrated in the top two growth drivers, i.e., Maharashtra and Tamil Nadu.
The International Monetary Fund (IMF) last week said high-frequency indicators signal plateauing of economic activity in India as the positive impact from the unwinding of lockdown measures is not enough to offset the impact of the lockdown. It urged the government to urgently contain the spread of the coronavirus pandemic on a priority to make economic recovery sustainable.
