India’s manufacturing activity picked up in December; employment remains a concern, says survey

India’s manufacturing activity remained steady in December with stepped-up production and buying of inputs by companies, showed a private survey as employment remained a pain point after it fell for the ninth month in a row.

The IHS Markit India's Manufacturing Purchasing Managers' Index (PMI) comes at 56.4% as compared to 56.3% in November but employment remained a pain point as it fell for the ninth month in a row.

The reading came above 50, which separates growth from contraction, for the fifth consecutive month.

The survey findings, however, showed companies stating that government guidelines to have employees working only in shifts and difficulties in finding suitable staff were the key factors causing the latest fall in the payroll numbers. The pace of contraction, however, was moderate.

While firms were able to lift input stocks and did so at the quickest rate in nearly a decade, holdings of finished goods decreased sharply due to the ongoing increase in new work. One area that failed to improve was employment with jobs shedding once again at the end of 2020, it said.

Meanwhile, raw material scarcity at suppliers' end caused delivery delays and the fastest rise in input costs for over two years.

International demand for Indian goods rose but anecdotal evidence suggested that growth was hampered by the Covid-19 pandemic. As a result, new export orders increased at the slowest pace in the current four-month sequence of expansion.

"When we combine the latest three months, we see that the performance of the manufacturing industry for the third quarter of the fiscal year 2020-21 was notably better than in the second quarter," said Pollyanna De Lima, Economics Associate Director at IHS Markit in a statement.

"It is important to emphasise the broad-based nature of recovery with marked expansions in both sales and output noted across each of the three monitored sub-sectors," she said.