Service sector sees fall in business activity again in May

Once again in May, India's service sector witnessed extreme fall in business activity as the unfavourable economic effects of COVID-19 pandemic impaired business operations, restricted consumer footfall and led demand to collapse. The seasonally adjusted Nikkei Services Business Activity Index was at 12.6 in May from 5.4 in April, according to the survey report. This ready indicates a substantial decline in the health of the Indian service sector, even if it is not much different  from that recorded in April.

Additionally, the Nikkei India Composite PMI Output Index, measuring both manufacturing and services, was at 14.8 in May from 7.2 in April. As stated in the report, output sank sharply due to extended business shutdowns and weakened demand conditions, while new business from overseas markets collapsed on an unprecedented scale once again during May. With many businesses remaining shut down during May, the extent to which spare capacity grew slowed remarkably as a number of firms informed about a build-up in unfinished work owing to idle operations. Nonetheless, there was an overall decline in backlogs of work.

Moreover, midway through the second quarter, price data showed deflationary trends across both input costs and output charges. However, while the rate at which output price fell slowed down, operating expenses dropped at the fastest rate in survey history. Besides, overall employment dropped further during May, although a weaker decline at service companies contrasted with a steeper drop at good producers.