India’s services activity shrunk for the sixth consecutive month in August, resulting in a sharp rise in job losses, according to an industry survey released Thursday.
The sharp slump in services activity has resulted in the longest streak of job losses recorded in the country.
The Nikkei/IHS Markit Services Purchasing Mangers’ Index increased to 41.8 in August from the dismal 34.2 in July. However, it remained well below the 50-mark which separates growth from contraction.
This was the sixth straight month when the index remained below 50 and is the longest stretch since. 10-month run to April 2014.
Shreeya Patel, an economist at IHS Markit told news agent Reuters that sustained periods of closure and ongoing lockdown restrictions in both domestic and foreign markets have weighed heavily on the health of the industry.
While the government has now started unlocking more economic activity, the sharp rise in daily coronavirus cases still remains a major concern.
As the pandemic rages on, economic activity is unlikely to return to pre-Covid levels even if restrictions are totally removed. People are still scared of getting infected; many prefer staying indoors rather, avoiding crowded places like shopping malls, cinemas, restaurants and hotels.
A poll conducted by news agency Reuters showed the Indian economy is likely to suffer its worst 12-month performance since 1979 for the fiscal year that ends March 2021, contracting at least 6 per cent. The contraction is likely to push millions into poverty.
While August numbers were better than July, all the sub-indexes tracking foreign and domestic demand remained n contraction zone and forced firms to reduce their workforce further.
The Centre For Monitoring Indian Economy (CMIE), a Mumbai-based think tank has said the job situation has further deteriorated in August. CMIE MD and CEO Mahesh Vyas told India Today the 21 million salaried people have lost their jobs since the pandemic caused disruption across multiple sectors since April.
The survey also suggested that services industry in India is likely to remain subdued for the next 12 months. Even on the price front, both input costs and prices charged rose in August, hinting that Asia’s third-largest economy could enter a period of stagflation — a phase marked by slow growth, unemployment, stagnant demand and high inflation.
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