NEW DELHI :
India’s manufacturing activity plummeted to a record low in April as the coronavirus lockdown imposed by the government forced factories to shut down and consumers to stay indoors, a private survey showed.
The manufacturing Purchasing Managers’ Index (PMI) for India declined to 27.4 in April from 51.8 in March, recording the sharpest deterioration in business conditions since data analytics firm IHS Markit started collecting the data 15 years ago.
A figure of above 50 indicates expansion, while a sub-50 print signals contraction.
The survey tracks new orders, output, jobs, suppliers’ delivery time, and stocks of purchases for around 400 manufacturers.
The decline in operating conditions was partially driven by an unprecedented contraction in output.
“Amid widespread business closures, demand conditions were severely hampered in April. New orders fell for the first time in two-and-a-half years and at the sharpest rate in the survey’s history, far outpacing that seen during the global financial crisis," IHS Markit said.
“In the latest survey period, record contractions in output, new orders and employment pointed to a severe deterioration in demand conditions.
Meanwhile, there was evidence of unprecedented supply-side disruption, with input delivery times lengthening to the greatest extent since data collection began in March 2005," said Eliot Kerr, an economist at IHS Markit.
New business orders received little support from international markets in April, as export orders tumbled. Deteriorating demand conditions saw manufacturers drastically cut their workforce in April. The reduction in employment was the fastest in the survey’s history.
The only silver lining was that the 12-month outlook for production recovered from its March lows, and was well above the 50 mark, though markedly lower than the long-term-average.
Pranjul Bhandari, chief India economist at HSBC, said with partial easing of the lockdown from Monday, she expects economic activity to pick up, led by postponed consumption and inventory restocking demand. “As such, the April reading is likely to mark the bottom of the PMI series. Yet, the recovery could be shallow and short-lived as we expect 50% of the economy will continue to be locked down as per the latest rules announced; several restrictions in ‘red zones’ will hamper backward and forward supply chains; and the large disruption in labour with many employees returning home to rural India may create manpower issues," she added.
India has extended its countrywide lockdown by another two weeks until 17 May, taking the lockdown period to eight weeks. Lockdown restrictions for restarting economic activities have been relaxed, especially for green and orange zones which either don’t have any or have low incidences of coronavirus cases.
However, with the continued disruption in economic activity, many economists are now projecting India’s gross domestic product to contract in FY21.
Standard Chartered Bank on Monday slashed its growth forecast for India to a contraction of 2% from a growth of 0.7% projected earlier, holding that the two-week extension in lockdown will be a significant drag on growth. “The top 10 states in terms of gross domestic product (GDP), which together contribute 70% of India’s GDP, have 35% of their districts categorized as ‘red zones’ (areas with high infection rates), on average. Most of the lockdown relaxations are not applicable in these areas. Given that industrialized states have a high proportion of red zones, and their infection rates have yet to show signs of deceleration, economic activity is likely to resume at a very gradual pace even after 17 May. Against this backdrop, we now believe economic activity will take much longer to return to normal levels," said Anubhuti Sahay, head, South Asia economic research, Standard Chartered Bank.