India’s Manufacturing Activity Loses Momentum In October

India’s manufacturing activity slowed down last month as the flow of new orders ‘stagnated’ on account of Goods and Services Tax-related disruptions.

The Nikkei India Manufacturing Purchasing Managers’ Index stood at 50.3 compared to 51.2, according to a statement by data agency Markit. A reading below 50 indicates contraction and a number above it signals expansion.

Output rose only fractionally during October while new orders remained unchanged. Muted demand even led to a decrease in purchasing activity and pre-production inventories, the Markit report said. Business confidence stood at its weakest level since February.

The implementation of GST from July 1 has had an adverse effect on businesses so far, according to comments by businesses leaders and brokerage reports. A number of fast moving consumer goods companies and carmakers have also attributed a weak July to September financial quarter to the new sales tax regime.

Meanwhile, employment rose for the third straight month in October. Firms increased the number of people on their payroll at a similar pace to that in September when new employment reached a 59-month high.

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The 50.3 number is marginally higher than the quarter average of 50.1, suggesting that manufacturing activity has been improving October onwards, said research firm Nomura in a report on the PMI data.

But rising commodity prices suggest that input cost pressures are also up, the Nomura report added.