In the wake of the coronavirus disease 2019 (COVID-19), Indian service sector recorded its largest month-to-month contractions in business activity and new orders since data collection began over 14 years ago in April. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index fell to 5.4 in April from 49.3 in March. Further, the Nikkei India Composite PMI Output Index -- which measures both manufacturing and services – also fell to 7.2 in April from 50.6 in March.
The report noted that activity fell severely as a result of the nationwide lockdown, leading businesses to shut down their operations as demand collapsed. Besides, restrictions on movement across India contributed to the steep drop in new orders during April. As a result of lower business requirements, some services companies reduced employment at the start of the second quarter. On the price front, input and output prices fell when compared to March, although respective rates of deflation were stronger at manufacturers than service providers.
Further, Indian service providers recorded a sharp drop in operating costs which was the strongest since data collection began in December 2005. The drop in expenses were a result of the lockdown, as firms observed lower running costs due to either partial or complete shutdowns. Consequently, firms were able to reduce their fees in an effort to stimulate sales.