Manufacturing sector expands for two months

Manufacturing sector expands for two months

India’s manufacturing sector expanded for the second consecutive month in February, after the demonetisation-induced contraction at the end of 2016, Nikkei Markit
Purchasing Managers Index (PMI) has said.

The February manufacturing sector reading increased to 50.7 from 50.4 in January. A reading above 50 denotes expansion, and below that depicts contraction. The PMI, however, said that the increase in inflation in February was the fastest in the last two-and-a-half years backed by higher raw material costs.

“Indian manufacturers benefited from recovering demand and raised production volumes in response to another expansion in inflows of new work,” Pollyanna de Lima, Economist at IHS Markit and author of the report, said.

“Of concern, higher commodity prices resulted in increased cost burden facing manufacturers. The sharp rate of inflation seen in February was the most pronounced in two-and-a-half years, and led factory charges to be raised at the quickest pace in 40 months,” Pollyanna said.

The Nikkei PMI comes a day after the country’s economic growth data showed manufacturing sector growth reaching close to 9% in the three months period from October to December 2016. The two favourable cues — manufacturing PMI and the third quarter GDP — saw the BSE Sensex trading higher at 210 points.

Nikkei saw confidence among Indian manufacturers relatively subdued in February.
DH News Service

It also said that the surge in inflation is likely to cause demand from price-sensitive consumers to fall and potentially jeopardise the economic recovery.

FM seeks more capital support from WB
Finance Minister Arun Jaitley on Wednesday sought increased capital support from the World Bank and lowering the effective rate of interest on its loans.

Jaitley said that since India has now decided to take assistance from the World Bank only through International Bank for Reconstruction and Development (IBRD) and cease the funding from IDA, an increase in IBRD support is imperative to meet India’s current requirement of $5-7 billion and a huge pipeline of projects.

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