A worker installs a window of a mass rapid transport (MRT) passenger car at the Alstom SA manufacturing facility in Sri City, Andhra Pradesh. (Photographer: Udit Kulshrestha/Bloomberg)

India’s Manufacturing Growth Eases Further In August

Manufacturing activity in India grew at a slower pace for the second consecutive month in August, as operating conditions improved at the slowest pace since May.

The Nikkei India Purchasing Managers Index fell to 51.7 in August, from 52.3 in the previous month, according to a statement by IHS Markit that compiles the index. A reading below 50 indicates contraction in activity, while a number above it signals expansion. Manufacturing activity in the country has remained above the 50-point-mark for the thirteenth consecutive month led by strong underlying demand.

“August data signalled a further loss of growth momentum across India’s manufacturing sector, reflecting slower gains in output and new orders,” Aashna Dodhia, economist at IHS Markit said. “That said, reflective of strong demand conditions, the rates of expansion were solid,” she added.

Input cost inflation eased further from June’s multi-year high and firms raised their output charges at the slowest rate since April. However, “rupee depreciation against the U.S. dollar continued to place strong upward pressures on input prices”, Dodhia said. In a bid to protect margins, manufacturing companies raised selling prices for the thirteenth straight month.

Orders from abroad rose for the tenth consecutive month, with the expansion rate strongest since February on rising demand from international markets.

Overall, Indian manufacturers retained a positive 12-month outlook but the level of sentiment eased a bit.

Indeed, some of the key headwinds facing the economy include high global oil prices, monetary policy tightening, and capital outflows from emerging markets.
Aashna Dodhia, Economist, IHS Markit