India's June services PMI at 41.2, the fastest drop in 11 months

 This is expected to affect the GDP growth rate during the April-June quarter

India’s services sector activities contracted further in June as the intensification of the Covid crisis and reintroduction of containment measures restricted demand, revealed a monthly survey on Monday. This follows close on the heels of the factory output data registering a sharp decline during the period.

The seasonally adjusted India Services Business Activity Index — compiled by IHS Markit — fell from 46.4 in May to 41.2 in June, as new work intake and output contracted at the fastest rate since July 2020, which prompted companies to reduce employment again.

In Purchasing Managers’ Index (PMI) parlance, the 50-point mark separates expansion from contraction.

“Given the current Covid situation in India, it was expected that the services sector would take a hit. The PMI data for June showed that the quicker declines in new business, output, and employment were sharp but softer than those recorded in the first lockdown,” said Pollyanna De Lima, economics associate director at IHS Markit.

“Uncertainty about the path of the pandemic restricted business confidence among services firms, which were generally neutral in their forecasts for output in the year ahead. The overall level of sentiment slipped to a 10-month low,” she added.

She, however, pointed out that with India expanding its vaccine options and the government announcing ambitious plans to immunize the entire adult population by the end of the year, “it is hoped that the pandemic can be brought under control and a sustainable economic recovery can begin”.