After registering a staggering growth in February India’s services sector activity contracted during March as the COVID-19 pandemic dented demand in the segment, a monthly survey stated. The pandemic has particularly affected the overseas markets, while public health measures aimed at stemming the outbreak curtailed discretionary spending, the survey added.

Services Purchasing Managers’ Index (PMI) fell in March to 49.3, after hitting an 85-month high in February at 57.5, IHS Markit India Services Business Activity Index stated in its monthly survey.

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The survey said that the headline figure fell by over 8 points, undoing the strong gains in growth momentum seen throughout 2019. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.

“The impact of the COVID-19 pandemic on India’s services economy has not been fully realised yet,” said Joe Hayes, Economist at IHS Markit.

“March PMI data showed business activity falling mildly. Crucially, however, the survey data collection (12-27 March) was concluding just as Prime Minister Modi ordered a complete lockdown of the country. Clearly, the worse is yet to come as nationwide store closures and prohibition to leave the house will weigh heavily on the services economy, as has been seen elsewhere in the world. Pressure now fully lies on the government to combat the economic challenges the lockdown will cause,” Hayes added.

According to panel members, business activity was reduced in response to weaker demand and firms responded by reducing their workforce as intakes of new business were insufficient to maintain payroll numbers.

Latest survey data pointed to the first fall in order book volumes at Indian service providers since September 2019. “Pressure now fully lies on the government to combat the economic challenges the lockdown will cause,” Hayes said.

The survey further noted that there were widespread reports of new business receipts struggling due to the COVID-19 outbreak, deterring discretionary spending. A number of firms also mentioned lower sales as a result of liquidity issues.

Meanwhile, the Composite PMI Output Index that maps both the manufacturing and services sector fell to 50.6 in March, down 7 points from February’s 57.6 to signal a sharp slowdown in private sector output growth and bringing an abrupt end to the recent strong upward-moving expansion trend.

The number of deaths around the world linked to the new coronavirus has crossed over 69,000. In India, more than 4,000 coronavirus cases have been reported so far.