NEW DELHI: November saw the manufacturing sector record the strongest improvement in business activity in 13 months on the back of robust growth in new orders and reduction in GST rates. The Nikkei India Manufacturing Purchasing Managers’ Index (PMI) rose from 50.3 in October to 52.6 in November, showing notable improvement in the sector.
This is for the fourth consecutive month that the index has come in above the 50-point mark that separates expansion from contraction.
According to survey respondents, a combination of higher order book volumes and a drop in GST rates largely contributed to greater production.
“Growth in output and new orders picked up to the fastest since October 2016, reportedly supported by reductions in GST rates and stronger underlying demand conditions,” said Aashna Dodhia, Economist at IHS Markit and author of the report.
However, the headline PMI remained below the average seen since the inception of the survey in March 2005.
Moreover, stronger factory production levels translated into the fastest rate of employment creation since September 2012. Besides, export growth rose for the first time in three months as overseas demand for Indian goods improved.
On the price front, input cost inflation quickened to the fastest since April, but firms were unable to fully pass on higher cost burdens to price-sensitive clients.
“Underlying data indicated that the central bank is less likely to adopt an accommodative stance as input cost inflation intensified to the fastest since April,” the report noted.
Dodhia added that the current phase of expansion led to a pick-up in business sentiment as “growth momentum seems likely to continue over the near-term”.
Reversing a five-quarter slide in GDP growth, Indian economy bounced back from a three-year low to expand by 6.3 per cent in July-September as manufacturing revved up and businesses adjusted to the new GST tax regime.