India’s service sector activity falls to 49.3 in March amid coronavirus outbreak

07 Apr 2020 Evaluate
After recording the strongest rise in business activity for over seven years in February, Indian services sector growth contracted in the month of March, as the outbreak of the coronavirus disease 2019 (COVID-19) dented client demand, particularly in overseas markets. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index fell to 49.3 in March from 57.5 in February. Further, the Nikkei India Composite PMI Output Index -- which measures both manufacturing and services – also eased to 50.6 in March from 57.6 in February.

The report noted that business activity was reduced in response to weaker demand. The global COVID-19 pandemic reportedly led a fall in new orders from clients, particularly overseas.  That said, the decrease in output was mild overall. In response to reduced business requirements, the level of employment across the Indian services sector fell as firms cut workforce numbers to keep operating costs tight. Further, backlogs of work rose at a slight, but weaker rate in March.

On the inflation front, input costs facing Indian service providers increased at the slowest rate for six months during March. Consequently, output charges rose at a pace that was softer than in February and below its long-run average. The report also said that firms were still optimistic that activity levels would rise over the next 12 months as the extreme measures to curb the spread of COVID-19 are lifted and global demand begins to recover.
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