India's services activity shrinks for sixth month in Aug, job losses mount
03 September, 2020
Activity in India's crippled services industry fell for a sixth straight month in August as coronavirus restrictions continued to hurt business businesses and demand, creating the longest streak of job losses on record, an industry survey showed.
Thursday's (Sep 3) survey increases the gloom in the service sector, an engine of financial growth and jobs, suggesting an extended and painful road to recovery following the economy shrank nearly 25 % from April to June.
Although the Nikkei/IHS Markit Services Purchasing Managers' Index risen to 41.8 in August from July's 34.2, it remained well below the 50-mark separating growth from contraction.
August was the sixth straight month the index was sub-50, the longest such stretch since a 10-month set you back April 2014.
"August highlights another month of challenging operating conditions in the Indian services sector," Shreeya Patel, an economist at IHS Markit, said in a release. "Sustained periods of closure and ongoing lockdown restrictions in both domestic and foreign markets have weighed heavily on the fitness of the industry."
Hoping to avert much more serious economic damage, the federal government has said it planned to reopen underground train networks and invite sports and religious events in a limited manner despite coronavirus cases growing at the most effective rate in the world's second-most populous country.
Amid the raging pandemic, even if restrictions are eased, financial activity is unlikely to quickly go back to pre-COVID-19 levels as concern with getting infected could keep millions of men and women indoors, avoiding shopping malls, cinemas, restaurants and hotels.
A Reuters poll showed the Indian economy will probably suffer its worst 12-month performance since 1979 for the fiscal year that ends March 2021, contracting 6 %, pushing millions more into poverty.
Although improved from July, sub-indexes tracking domestic and foreign demand remained firmly in contraction territory, leading businesses to reduce their workforce for the sixth straight month, the longest streak on record.
Expectations for future business activity gave little expect an imminent turnaround as service businesses gave a neutral outlook for the next 12 months.
A composite index, which measures both services and factory activity, improved to 46.0 in August from July's 37.2, cushioned by an improved manufacturing performance, but remained well below the neutral 50.0 level.
On the purchase price front, both input costs and prices charged rose in August, suggesting Asia's third-largest economy could enter an interval of stagflation - a phase with lofty inflation, high unemployment and stagnant demand.
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