Factory output growth rises to 5-month high in February

New Delhi: India’s manufacturing sector growth in February rose to the highest level in five months, helped by lower inflationary pressure and high global demands, data released by S&P Global showed on Friday.

India’s Purchasing Managers’ Index (PMI) for manufacturing increased to 56.9 in February, marginally higher than 56.5 recorded in the previous month. There has been a strong recovery in manufacturing activities in the past two months. The PMI print has shown strong improvement after slipping to an 18-month low of 54.9 in December.

Export orders help

“Production rose at the fastest pace in five months, fuelled the quickest increase in sales since last September and the strongest expansion in new export orders for 21 months,” S&P Global said in the monthly report.

New export orders in February rose at the fastest rate in nearly two years. Strong demands for the Indian products in Australia, Bangladesh, Brazil, Canada, mainland China, Europe, Indonesia, the US and the UAE led to a jump in export orders.

“Production growth continued to be strong, supported by both domestic and external demand,” said Ines Lam, Economist at HSBC.

Lowered input costs

Manufacturing firms’ margins improved as input price inflation slipped to the lowest since July 2020. Prices charged by Indian manufacturers increased at a slower rate, the weakest since March 2023.

Only 8% of the companies that participated in the survey hiked their price. The reasons for increase in price by these manufacturers are cited as higher freight, material and wage costs.

The PMI data is based on a survey of around 400 manufacturers spread across the country. The PMI print above 50 indicates growth in the sector while below 50 shows contraction. Manufacturing PMI has been above 50 for 32 months in a row.

Purchases rise

February saw a further pick-up in manufacturers’ purchasing activity, with the rate of growth up to the fastest since September 2023. Firms reportedly scaled up buying levels in response to greater production requirements, sustained increases in sales and to build safety stocks.

Hiring lags

Despite the uptick in growth momentum, there was hardly any increase in jobs. Surveyed firms mentioned that “payroll numbers were sufficient for current requirements,” S&P Global noted in the report.

GST collection tad lower than in Jan

Meanwhile, revenue collection from Goods and Services Tax (GST) increased by 12.5% year-on-year to Rs 1.68 lakh crore in February, data released by the Union Ministry of Finance showed. However, sequentially there was a decline. It stood at Rs 1.72 lakh crore in January.

As of February 2024, the total gross GST collection for the current fiscal year stands at Rs 18.40 lakh crore, which is 11.7% higher than the collection for the same period in FY 2022-23. The average monthly collection in the first 11 months of the current financial year stands at Rs 1.67 lakh crore as compared to Rs 1.5 lakh crore recorded in the corresponding period of last year.

GST revenue, net of refunds, as of February 2024 for the current fiscal year stood at Rs 16.36 lakh crore, which is 13% higher over that for the same period last year.

Pratik Jain, partner at Price Waterhouse & Co, said the GST revenue collection growth so far in the current financial year is more than projected growth for FY 2024-25. “With this trend, it is reasonable to expect that the Government may meet next year’s collection target easily,” Jain said.