India's manufacturing activity declined at its sharpest pace on record in April as the lockdown announced by the government to curb the rapid spread of the deadly coronavirus led to a fall in demand and supply chain disruptions, according to a private sector survey.

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The Nikkei Manufacturing Purchasing Managers' Index, compiled by IHS Markit, declined to 27.4 last month from 51.8 in March, its lowest since the survey began in March 2005. For the first time, it is below the 50-mark separating growth from contraction in nearly three years.

"After making it through March relatively unscathed, the Indian manufacturing sector felt the full force of the coronavirus pandemic in April," Eliot Kerr, economist at IHS Markit, said.

"Record contractions in output, new orders and employment pointed to a severe deterioration in demand conditions."

The ongoing nationwide lockdown began on March 25 and was extended twice. The country's gross domestic product is expected to shrink for the first time since the mid-1990s this quarter, a Reuters poll showed last month.

That was despite the government announcing a spending package of Rs 1.7 trillion ($22.4 billion) and a significant easing in monetary policy by the Reserve Bank of India.

With new orders and output shrinking at the steepest pace since at least early 2005 factories cut jobs at the fastest rate in the survey's history, signaling a high chance of recession.

And indicating major supply-side disruptions, a sub-index tracking supplier's delivery times declined to a level not seen since the survey began.

A record slump in both input and output prices, suggesting a sharp fall in overall inflation which has held above the Reserve Bank of India's medium-term target of 4 percent for six months, failed to stoke demand.

That gives scope for the central bank, which has already cut its repo rate and reverse repo rate by 75 basis points and a cumulative 115 basis points respectively, to ease further.

Despite the huge slump in activity, optimism about the coming 12 months improved from March's four-and-a-half year low but was still below the long-term average.

First Published:May 4, 2020 10:41 AM IST