India’s manufacturing activity expanded for a second consecutive month in September although companies struggled to sustain demand, with the price of goods barely increasing, a survey has said.
The Nikkei India Manufacturing Purchasing Managers’ Index (PMI) came in at 51.2 in September, little changed from its August reading, pointing to an ongoing recovery in business conditions, post GST launch. The figure was below the long-run trend of 54.1. A reading above 50 denotes expansion and one below this mark means
“September data painted an encouraging picture as the sector continued to recover from the disruptions caused by the introduction of GST in July,” said Aashna Dodhia, economist at IHS Markit, and author of the report. “Business confidence strengthened among manufacturers as they reportedly anticipate long-term benefits from recent government policies. This was confirmed as the sector experienced meaningful gains in employment.”
The new orders sub-index, a proxy for domestic demand, fell to a three-month low of 51.0 in September from 51.5, discouraging firms from increasing output faster. Foreign demand fell. On the back of more new work orders, Indian manufacturers raised their staffing levels at the fastest pace since October 2012.
On the prices front, the survey said that though cost pressure intensified during September, inflation remained weaker than the long-run trend. The strengthening of the Indian rupee may put a squeeze on efforts to revive demand for Indian goods from export markets.
“The lingering effects of recent economic shocks continue to cast a shadow on economic growth as IHS Markit downgrades its real GDP growth forecast to 6.8 per cent for fiscal year 2017-18,” Dodhia said, adding that “it will be interesting to see if India’s new economic advisory council will bolster its path to recovery”.