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Wednesday, April 21, 2021

Explained: Why has India’s factory activity plummeted to 7-month low in March?

Employment declined in March, marking a year of job losses. The rate of contraction was modest, but the quickest since September 2020.

Written by Aanchal Magazine , Edited by Explained Desk | New Delhi |
April 5, 2021 12:54:31 pm
Women working in a textile factory in Noida. (Express Photo: Abhinav Saha, File)

India’s manufacturing sector activity weakened sharply in March with the IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) slipping to a seven-month low of 55.4 from 57.5 in February. This marks an indication for slowdown in the manufacturing sector due to restrictions on account of the fresh surge in Covid-19 pandemic cases and the situation is set to turn more challenging in April.

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PMI data

Employment declined in March, marking a year of job losses. The rate of contraction was modest, but the quickest since September 2020. The survey results showed that the fall stemmed from COVID-19 restrictions related to workforces.

Average cost burdens continued to increase sharply in March. The rate of inflation was the second-strongest in under three years, on the back of higher chemical, metal, plastic, rubber and textile prices.

What does this indicate?

Though PMI has slowed, it remained above the 50-level separating growth from contraction for the eighth straight month. But, reintroduction of lockdown measures in some states might impact activity and sentiment going ahead in April.

“Survey participants indicated that demand growth was constrained by the escalation of the COVID-19 pandemic, while the rise in input buying was curtailed by an intensification of cost pressures. While predictions that the vaccination programme will curb the disease and underpin output growth in the year ahead meant that business confidence remained positive, growing uncertainty over the near-term outlook due to a rise in COVID-19 cases dragged sentiment to a seven-month low,” Pollyanna De Lima, Economics Associate Director at IHS Markit said.

“With COVID-19 restrictions expanded and lockdown measures re-introduced in many states, Indian manufacturers look set to experience a challenging month in April,” Lima added.

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