June 2021: Services activity shrinks

Ravaged by the second wave of the pandemic, activity in the country’s crucial services sector contracted at its sharpest pace in nearly one year in June as firms witnessed decline in sales and output.

Registering 41.2 in June, the India Services Business Activity Index highlighted a further contraction in output. Falling from 46.4 in May, the latest reading pointed to the fastest rate of reduction since July 2020. Monitored companies commonly indicated that the intensification of the Covid crisis and tight restrictions curbed demand for services.

The crucial services sector has been hit hard by the second wave of the corona-virus pandemic with hotels, restaurants, the hospitality sector and tourism facing the brunt of the localised lockdowns. The 50-point mark separates expansion from contraction and the fall in the services index comes close on the heels of the contraction in manufacturing activity in June. The survey is compiled from responses to questionnaires sent to a panel of around 400 service sector companies.

It showed that new work intakes and output contracted at the fastest rates since July 2020, which prompted companies to reduce employment again.

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