Context: Recently, IHS Markit India Services Business Activity Index (Service Purchasing Managers’ Index (PMI) was at 49.3 in March, down from February’s 85-month high of 57.5, as the new coronavirus pandemic pulled the service sector into contraction.
Key Points

• The Index is compiled by IHS Markit which is a global leader in information, analytics and solutions for the major industries and markets.
• The fall implies contraction in India’s services sector activity during March basically due to COVID-19.
• The Composite PMI Output Index that maps both the manufacturing and services sector also fell to 50.6 in March, down 7 points from February’s 57.6.
• In PMI language, above 50 means expansion, while a score below that denotes contraction.

About Purchasing Managers’ Index

• PMI is an indicator of business activity-both in the manufacturing and services sectors.
• It is a survey-based measure that asks respondents about changes in their perception of some key business variables from month before.
• PMI is usually released at start of month, much before most of official data on industrial output, manufacturing and GDP growth is made available. It is, therefore, considered a good leading indicator of economic activity.
• Manufacturing growth measured by PMI is considered good indicator of industrial output.
• It is calculated separately for manufacturing and services sectors and then composite index is constructed.
• It is different from the Index of Industrial Production (IIP), which also gauges the level of activity in the economy.