India’s manufacturing growth stays robust in Aug, inflation eases

India’s manufacturing activity remained robust in August, with production and new orders strongest since last November. The S&P Global India Manufacturing Purchasing Managers’ Index (PMI) dipped to 56.2 in August from a reading of 56.4 in July.

A reading above 50 indicates expansion and a print below that denotes contraction. India’s manufacturing activity continued to expand for the 14th straight month.

Demand boosted new orders in August to push output growth to a nine-month high. Production volumes were also supported by a pick-up in exports and upbeat projections for the year-ahead outlook, said the monthly report. Manufacturers attributed the fastest increase in production in nine months to higher sales, efforts to enhance capacities, product diversification and fewer Covid-19 restrictions.

“This robust performance was complemented by a fourth successive monthly slowdown in the rate of input cost inflation, which slipped to the lowest in a year amid softer pressures from commodity prices,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

The findings also revealed recent inflation concerns somewhat faded, as business sentiment strengthened further from June’s 27-month low. Predictions of stronger sales, new enquiries and marketing efforts all boosted business confidence in August. Lower commodity prices, especially aluminum and steel, helped in moderating inflation.

The rate of input cost inflation softened to the weakest in a year, but the passing of higher freight, labour and material prices to clients kept the pace of increase in output prices little-changed from July.

“Firms welcomed the weaker increase in input costs with an upward revision to output forecasts amid renewed hopes that contained price pressures will help boost demand. Inflation concerns, which had dampened sentiment around mid-year, appear to have completely dissipated in August as seen by a jump in business confidence to a six-year high,” said De Lima.

International markets gave a fillip to total sales, as seen by a marked and quicker increase in new export orders halfway through the second fiscal quarter, the report said. Strong sales growth and a rise in production requirements supported a further increase in input buying at manufacturers, said the monthly report. Despite easing from July, the pace of expansion remained sharp, it said.

On the supply side, the findings showed a further shortening of delivery times and a slower upturn in prices charged by vendors. Delivery times shortened to the greatest extent in close to five years.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor