According to the survey, the expansion in sales and output in the manufacturing sector during November was largely supported by positive demand trends.
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New Delhi: India’s manufacturing sector growth slipped to a 11-month low in November dragged by weak demands amid high inflationary pressure, an industry survey conducted by S&P Global showed on Monday.
Purchasing Managers’ Index (PMI) for manufacturing declined to 56.5 in November from 57.5 in the previous month. The PMI print above 50 indicates growth in the sector while below 50 shows contraction.
S&P Global noted in its monthly report that the manufacturing sector growth in November was “supported by favourable demand conditions, but stymied by fierce competition and price pressures.”
“The rate of output expansion is decelerating due to intensifying price pressures,” said Pranjul Bhandari, Chief India Economist at HSBC.
The survey results showed that Indian goods producers increased their selling prices in November to the greatest extent since October 2013. “Survey participants suggested that additional outlays on freight, labour and materials had been shared with clients,” S&P Global said.
Input cost inflation intensified midway through the third fiscal quarter, reaching its highest mark since July.
“Input prices for a variety of intermediate goods including chemicals, cotton, leather, and rubber rose in November, while output prices soared to an eleven-year high as rising input, labour, and transportation costs were passed on to consumers,” Bhandari said.
This high frequency data suggest continued tepid performance of manufacturing activities and inflationary pressure in the economy.
As per data released by the National Statistics Office (NSO) last week, India’s gross domestic product (GDP) growth dipped to a seven quarter low of 5.4 per cent in July-September period, largely due to sluggish manufacturing activities. Manufacturing sector growth during the period was at a six-quarter low of 2.2 per cent.
On the other hand inflationary pressure has intensified in the recent months. The headline retail inflation surged to a 14-month high of 6.21 per cent in October, as per the latest official data.
Although price pressures curbed domestic sales to a certain extent, growth of new export orders gained momentum in November. The rate of expansion in international demand was the best seen for four months, with panellists reporting gains from Bangladesh, mainland China, Colombia, Iran, Italy, Japan, Nepal, the UK and the US, S&P
Global said.
The rate of expansion of manufacturing activities slowed to the lowest level in the calendar year-to-date due to increased competition, inflationary pressures and subdued orders.
However, businesses remained optimistic. The business optimism was spurred by predictions that marketing efforts and new product releases will bear fruit. Recent capacity expansion efforts and forecasts of demand strength also underpinned upbeat forecasts for output in 2025, the report showed.
For the ninth month in a row, factory employment in India increased during November. Despite softening from October, the rate of job creation remained solid.
According to panel members, staff had been hired on both permanent and temporary bases. The report is based on a survey conducted among round 400 manufacturers in India.