NEW DELHI: Despite the relaxation in coronavirus-induced restrictions, India’s services sector activity remained muted for the fifth month in a row in July, according to a survey. Indicating the deep slump in demand, which forced companies to cease operations and reduce staff, IHS Markit India’s services business activity index for July stood at 34.2, a tad above 33.7 in June.
If the index is above 50, it means an overall expansion while that below 50 shows contraction. The performance of the services sector is critical to assess economy as it has a share of nearly 57% in the GDP, which is way above the other two key sectors — industry and agriculture.
With demand severely restricted, July data highlighted another round of job cuts, while firms’ output expectations in the year ahead remained pessimistic. “The coronavirus pandemic and subsequent introduction of lockdown measures continued to weigh heavily on the Indian service sector in July. Business activity and new orders dropped again, with the rates of decline remaining rapid overall,” said Lewis Cooper, Economist at IHS Markit.
According to him, any substantial recovery in future will take several months, if not years.“The latest IHS Markit estimates point to an annual contraction in GDP of over 6% in the year ending March 2021,” he said. Survey respondents linked falls in both activity and order books to the adverse impact stemming from Covid-19.
Job cuts
With overall demand conditions severely muted, service providers made further job cuts in July. The rate of job shedding was the fastest on record, triggered by weak demand