India’s services activity suffered a shock collapse in April as the coronavirus lockdown crippled global demand, causing a historic spike in layoffs and reinforcing fears of a deep recession in Asia’s third-largest economy, a private survey showed.

The Nikkei/IHS Markit Services Purchasing Managers’ Index plunged to an eye-popping 5.4 in April from March’s 49.3, an unprecedented contraction since the survey first began over 14 years ago.

Just two days ago, Nikkei/HIS Markit reported a contraction in the manufacturing sector with the Nikkei Manufacturing Purchasing Managers’ Index plunging to 27.4 last month from March’s 51.8, by far its lowest since the survey began in March 2005 and its first time below the 50-mark separating growth from contraction in nearly three years.

According to the IHS Markit India Services Purchasing Managers' Index (PMI), a print above 50 means expansion, while a score below that denotes contraction.

According to analysts, activity fell severely as a result of the nationwide lockdown, leading to businesses to shut down their operations as demand collapsed.

“The extreme slide in the headline index, which fell by over 40 points, shows us that the strict lockdown measures have led to the sector essentially grinding to a complete standstill,” said Joe Hayes, economist at IHS Markit.

Meanwhile, the Composite PMI Output Index, which measures combined services and manufacturing output, sank to 7.2 in April from 50.6 in March, signalling the worst contraction in economic activity since data collection began in late-2005, Hayes said.

Moreover, international sales fell across the entire survey panel in April, as signalled by the respective index falling to 0.0.

According to firms, measures to stem the spread of the virus overseas had caused demand to fall across all key export markets.

“Historical comparisons with gross domestic product (GDP) data suggest that India’s economy contracted at an annual rate of 15 per cent in April,” Hayes said.

“It is clear that the economic damage of the Covid-19 pandemic has so far been deep and far-reaching in India, but the hope is that the economy has endured the worst and things will begin to improve as lockdown measures are gradually lifted,” Hayes said.

On employment, the survey said owing to lower business requirements, some services companies reduced employment at the start of the second quarter.

On the prices front, the survey said input and output prices fell when compared with March, although the respective rates of deflation were stronger at manufacturers than service providers.

Going ahead, the latest survey data signalled a further erosion of business confidence in April.

Expectations towards future output slumped for a second successive month to their weakest since December 2015, the survey noted.

The nationwide lockdown to contain the spread of coronavirus infection began on March 25. The number of Covid-19 cases in India climbed to 49,391 in the country on Wednesday, and the death toll rose to 1,694, according to the health ministry.