India’s factory activity contracted sharply in May following a historic decline in April as a government-imposed lockdown to control the coronavirus hammered demand, a survey showed, leading firms to cut jobs at the fastest pace on record. The IHS Markit India Manufacturing Purchasing Managers’ Index increased to 30.8 last month from April’s record low of 27.4, still well below the 50-mark separating growth from contraction.

PMI manufacturing data continues to contract in May at 30.8, though at a slower pace than 27.4 registered in April, indicating deep impact of the lockdown .

Official statistics are also reflecting the ruinous implications of the lockdown on the economy. On May 12, the NSO said the country’s industrial production contracted a steep 16.7 per cent in March 2020 versus 2.7 perm cent growth in the year-ago month, and 4.5 per cent expansion in the previous month. Though most analysts expected a significant contraction of industrial output in March, as the last week of the month saw imposition of lockdown, the extent of the fall was far more pronounced than the expectations.

The Services PMI number – which also showed a contraction last month – will come out on Wednesday.

In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.

“The latest PMI data suggested that Indian manufacturing output fell further in May. This result is particularly poignant given the record contraction in April which was driven by widespread business closures,” said Eliot Kerr Economist at IHS Markit.

As per the survey, weaker demand drove output lower following April's record decline.

Consequently, firms cut staff numbers at the quickest pace since data collection began over 15 years ago.

“The further reduction in May highlights the challenges that businesses might face in the recovery from this crisis, with demand remaining subdued while the longevity of the pandemic remains uncertain,” Kerr noted.

The death toll due to Covid-19 rose to 5,394 and the number of cases climbed to over 1.90 lakh, according to the Union health Ministry.

Weak demand from international markets added to the deteriorating sales trend, with new business from abroad declining further in May.

“Anecdotal evidence suggested that global measures to stem the spread of Covid-19 continued to stifle exports,” the survey noted.

Going ahead, Indian manufacturers remained optimistic towards the one-year business outlook in May.

Confidence was supported by expectations for a return to growth once all coronavirus-related restrictions are lifted, the survey said adding that “the degree of positivity eased slightly from April and remained historically subdued”.