Representative image for manufacturing sector.
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India’s manufacturing output growth slipped to a 9-month low in November, as high US tariffs dragged export orders and the impact of the GST rate rationalisation faded, as per an industry survey report released by S&P Global on Monday.
Purchasing Managers’ Index (PMI) for manufacturing fell to 56.6 in November, from 59.2 in the previous month.
Production and sales of manufactured products in November posted weakest growth since February. New export orders slumped to the lowest level in 13 months.
“India’s final November PMI confirmed that US tariffs caused the manufacturing expansion to slow,” said HSBC Chief India Economist Pranjul Bhandari.
Weak demands hit job creation and business confidence. In November, the pace of job creation was the slowest in 21 months.
“Manufacturers in India adjusted their hiring efforts and purchasing activity in line with a slowdown in new order growth. The latter saw its weakest upturn since February. Meanwhile, employment expanded at the softest pace in the current 21-month period of uninterrupted growth,” S&P Global noted in its monthly report.
The S&P Global report, which is based on a survey conducted among around 400 manufacturing firms, indicates the fading impact of the goods and service tax (GST) rate rationalisation on demand. Boosted by pent-up domestic demands, manufacturing PMI in October had hit a five-year high.
As part of the GST rate rationalisation, the government substantially reduced taxes on a large number of products effective from September 22. The GST rate cuts and festive demands boosted manufacturing activities in October.
“Business confidence, as indicated by expectations for future output, showed a big fall in November, potentially reflecting increasing concerns about the impact of tariffs. The boost from the cuts in GST may be fading and it might be insufficient to offset the tariff headwind to demand,” said Bhandari.
Concerns around a competitive landscape, including competition from international firms, have hit business sentiments.
November's results showed an absence of pressure on the capacity of Indian manufacturers and their suppliers. Outstanding business volumes among goods producers were broadly unchanged from October, whereas vendor performance continued to improve.
Inflation rates receded in November, with input costs and selling charges rising at the slowest rates in nine and eight months, respectively.
While new business growth and efficiency gains supported an increase among some firms, others suggested that subdued demand for some of their products constrained output levels at their units, S&P Global noted in the report.