India's factory growth accelerated at the fastest pace in three months in August.
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India’s manufacturing activities growth rose to three months high in August led by strong demands even though cost inflationary pressure accelerated, an industry survey by S&P Global showed.
Purchasing Managers' Index (PMI) for manufacturing rose to 58.6 in August from 57.7 in July, the second-best monthly improvement in the health of the sector in nearly three years. August number is the highest since May when it had hit a 31-month high of 58.7. In June, it stood at 57.8.
The PMI print above 50 indicates growth in the sector while below 50 shows contraction. Manufacturing PMI has been above 50 mark for the 26th month in a row.
Demand strength was pivotal to August's robust performance, spurring the fastest upturn in new orders since January 2021. Competitive pricing and advertising were also cited as factors behind sales growth.
New orders and output increased at the fastest pace in nearly three years. “Robust and accelerated increases in new orders and production suggest that the sector looks set to provide a strong contribution to second quarter (fiscal) economic growth,” said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.
The PMI numbers came a day after the release of gross domestic product (GDP) data by the government. India’s GDP growth jumped to 7.8 per cent in April-June quarter, the fastest pace of expansion in a year, as per data released by the National Statistical Office on Thursday. Manufacturing sector growth stood at 4.7 per cent in Q1 of the current fiscal.
In its monthly survey report S&P Global noted that a healthy demand environment and favourable market conditions encouraged Indian manufacturers to step up production in August. Output rose for the twenty-sixth successive month, and to the greatest extent in just under three years, it said.
As per the survey report, cost inflation in August rose to the highest level in a year, led by a sharp jump in the prices of cotton, foodstuff, rubber, steel and machinery spare parts. “The presence of stronger cost inflationary pressures serves as a reminder of the challenges inherent in managing growth,” De Lima said.
Firms addressed rising input prices by lifting selling charges. However, the need to maintain competitiveness helped restrict charge inflation, she added.
Despite strong demands and growth in new orders companies remained cautious in hiring. Overall employment in August rose at the slowest pace in four months.