PMI: India’s Manufacturing Activity Expands After Four Months Of Contraction

A gauge of India's manufacturing sector rebounded to pre-Covid levels after four months of contraction as economic activity continues to pick up on easing curbs.

The India Manufacturing Purchasing Managers’ Index, compiled by IHS Markit, stood at 52 in August compared with 46 in July on a seasonally adjusted basis, according to a media statement. A print above 50 indicates expansion in business activity.

According to the firms surveyed, production growth was largely driven by greater domestic demand for goods, following the resumption of business operations. Output and new orders expanded at the fastest pace since February despite weak foreign demand, the release said.

However, job-shedding continued in the Indian manufacturing sector. The pace of contraction in workforce numbers softened from July but remained strong overall. Capacity restraints in employment drove the rise in incomplete work at Indian manufacturers midway through the third quarter, according to the release. The rate of increase in backlogs was the fastest since December 2012, it added.

Disruptions in supply chains continued for the sixth straight month, with firms citing transportation restrictions, supplier delays and capacity pressures as reasons for lengthening delivery times. This caused raw material prices to rise. But manufacturers reported lower factory-gate charges amid competition and efforts to boost sales.

Better demand conditions were accompanied with an improvement in sentiments for the next 12 months. Positive sentiment was often attributed to hope of the passing of Covid-19 pandemic, improving client demand, and new business wins. But market uncertainty and the onset of a global recession weighed slightly on the degree of confidence which was below the series average in August, it said.