Lockdowns cause India's services sector to shrink for the first time in eight months in May

Activity in India's services sector contracted in May- to 46.4 from 54.0 in April- for the first time in eight months.

Lockdowns across the country to curb the second wave of Covid dampened demand, prompting firms to cut jobs at the fastest pace since October, according to Nikkei/IHS Markit Services Purchasing Managers' Index.

Overall demand contracted at the sharpest rate since August, with foreign demand shrinking at the fastest pace since November.


Asia's third-largest economy, and the second worst-affected country in the world, grew at an annual pace of 1.6% during the first three months of 2021, just before the devastating second wave hit.

Services firms intensified their job cutting spree last month, laying off workers at the fastest pace since October, bad news for a labour market that has already seen millions thrown out of work in the past year.

A decline in business expectations to its lowest in nine months may lead firms to reduce payrolls further in coming months.

Input costs continued to surge, but firms were only able to pass some of the increase to customers due to weakening demand.

Despite an expansion in manufacturing activity, albeit at the slowest pace in 10 months, the contraction in services activity led an overall composite index to decline to a nine-month low of 48.1 in May, from 55.4 in April.