Pandemic Drags India's Services Activities to 3 Month Low in April

India's services sector activities eased to a three-month low in April, as the rise in business activity was constrained by the pandemic and sentiment towards growth prospects faded, a monthly survey said on Wednesday. The seasonally adjusted India Services Business Activity Index fell to 54 in April from 54.6 in March, the slowest increase in output in three months.

In PMI parlance, a print above 50 means expansion while a score below 50 denotes contraction. "The PMI results for April showed a more resilient economic performance for the service sector than expected given the escalation of the Covid-19 crisis in India," said Pollyanna De Lima, Economics Associate Director at IHS Markit. Lima further noted that firms foresee higher output volumes over the course of the coming year, but the business sentiment was dampened by worries surrounding the pandemic.

As per the survey, Indian services firms were optimistic regarding the 12-month outlook for business activity, but the overall level of positive sentiment fell to the lowest since last October. The escalation of the pandemic was the main drag on confidence. On the prices front, service providers noted the steepest rise in overall expenses since December 2011. Some firms lifted their selling prices in April amid the pass-through of rising cost burdens to clients, but 98 per cent of companies left fees unchanged due to efforts to secure new work and remain competitive.

"One area of concern was inflation. Services firms noted the steepest rise in overall expenses in over nine years as global shortages of inputs and higher transportation costs continued to exert upward pressure on outlays," Lima said. On the jobs front, payroll numbers fell for the fifth month in a row in April, albeit at a slight pace that was the weakest since January. The vast majority of panelists kept headcounts unchanged amid reports of sufficient capacity to cope with current workloads, the survey said.

Moreover, travel restrictions and the Covid-19 crisis continued to curb international demand for Indian services. New export orders declined for the 14th month running and at a quicker pace than registered in March, the survey said. Meanwhile, the growth of Indian private sector activity eased to the weakest in 2021 so far. The Composite PMI Output Index, which measures combined services and manufacturing output, fell from 56.0 in March to 55.4 due to slower increases at goods producers and service providers. 

"The upturn was generally curtailed by the escalation of the Covid-19 crisis," the survey said. Meanwhile, Governor Shaktikanta Das said that RBI will continue to monitor the situation from the resurgence of Covid-19 cases and will deploy all resources. "We have to marshal our resources for fighting the virus with vigour," he said. The governor also announced Rs 50,000 crore priority lending by banks for hospitals and oxygen suppliers, among others by March 31, 2022.