Manufacturing growth hits nearly 2-year high

In October, output increased for the 10th straight month and at the quickest rate in nearly four years and survey respondents attributed the latest rise in production to strong growth of new orders.

By: ENS Economic Bureau | Mumbai | Published:November 2, 2016 1:35 am

India’s manufacturing sector growth expanded at its fastest pace in almost two years in October, boosted by a surge in output and new orders, but it came alongside a sharp rise in input costs and some pass on to end-consumers, says a survey.

The Nikkei Markit India Manufacturing Purchasing Managers’ Index (PMI) — a gauge of manufacturing performance — rose to 54.4 in October from 52.1 in September, indicative of a robust improvement in manufacturing business conditions in the country. A reading above 50 in terms of manufacturing performance indicates expansion, while the marking below it means contraction. “October data provide positive news for India’s economy, as manufacturing output and new orders expanded at the fastest rates in 46 and 22 months, respectively,” Pollyanna De Lima, Economist at IHS Markit and author of the report, said.

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In October, output increased for the 10th straight month and at the quickest rate in nearly four years and survey respondents attributed the latest rise in production to strong growth of new orders.

“The sector looks to be building on the foundation of the implied pick-up in growth in the previous quarter,” Lima said but added that the extended easing cycle of the Reserve Bank, however, brought upside risks to inflation. The latest PMI data should help reinforce views India’s economy is growing at a robust pace, but it could also point to risks of inflation gathering steam and crimping the Reserve Bank of India’s room to ease policy further. The RBI’s Monetary Policy Committee (MPC), which has three members nominated by the government and the rest from RBI, lowered repo rate to 6.25 per cent from 6.50 per cent at the end of 2-day deliberations on October 4. The next meeting of the MPC is scheduled on December 6 and 7.

On prices, the survey said that part of the increase in cost burdens was passed on to consumers by way of higher selling prices, which is likely to continue on an upward trend as we head towards the year end. The amount of new work received by manufacturers grew markedly during October and the rate of expansion hit a 22-month high, largely driven by improved underlying demand.