COVID-19 resurgence pushes India’s service sector into contraction in May
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India’s service sector fell into contraction territory in the month of May, with the intensification of the COVID-19 crisis causing renewed declines in new business and output. As per the survey report, the seasonally adjusted Nikkei Services Business Activity Index fell to 46.4 in May from 54.0 in April. Further, the Nikkei India Composite PMI Output Index -- which measures both manufacturing and services - also eased to 48.1 in May from 55.4 in April.
The report said that growth of new work intakes ground to a halt in May, with companies noting the first decline in sales since September 2020. Survey participants indicated that demand was dampened by the intensification of the COVID-19 crisis. International demand for Indian services also worsened, with new export business falling at the quickest rate in six months. The drop was attributed to international travel restrictions and business closures.
Besides, pandemic-related worries and falling sales led services companies to reduce workforce numbers again during May. The decline was modest, but the quickest in the current six-month sequence of job shedding. Further, amid reports of higher prices for a wide range of inputs and fuel, operating expenses at services firms continued to increase in May. The rate of inflation remained sharp and above its long-run average, despite slowing to the weakest since January.
