New Delhi: India’s manufacturing activity fell to an 18-month low in December due to the softening of new orders and output, a private survey said on Wednesday.
According to the HSBC India Manufacturing Purchasing Managers’ Index (PMI), which is compiled by S&P Global, India’s manufacturing PMI fell to 54.9 in December from 56 in November and 55.5 in October. In October, India’s manufacturing activity recorded its slowest rate of expansion since February. A PMI reading above 50 indicates an expansion and below 50 a contraction.
The latest PMI numbers, based on a survey of 400 manufacturers, come a month after data showed that the Indian economy grew at an impressive 7.6% in the second quarter on the back of higher government spending and strong performance in the manufacturing, mining and construction sectors.
Meanwhile, the latest survey said the manufacturing sector expanded in December despite slowing growth momentum. “There were softer, albeit sharp, increases in factory orders and output, while business confidence towards the year-ahead outlook strengthened,” it added.
Indian merchandise exports have been affected by a slowdown in global growth. The tightening of interest rates due to nagging inflation, especially in advanced economies, has led to a slowdown in business, investment and trade. Conflicts in Ukraine and West Asia have also threatened to push up commodity prices, leading to greater inflationary pressures.
CPI inflation
Meanwhile, India’s consumer price index (CPI) inflation came in at 5.55% in November, up from 4.87% in October and 5.02% in September.
While the latest CPI inflation figure was higher than the Reserve Bank of India’s (RBI) target of 4%, it remained within the central bank’s tolerance range of 2-6% for the third consecutive month.
“India’s manufacturing sector continued to expand in December, although at a softer pace, following an uptick in the previous month,” said Pranjul Bhandari, chief India economist at HSBC.
“Growth of both output and new orders softened, but on the other hand, the future output index rose since November. Rates of increase in input and output prices were broadly unchanged,” Bhandari added.
During November, the output of eight core infrastructure sectors expanded at 7.8%, the slowest pace of growth since May.
While the production of coal and refinery products increased significantly during the month, cement and crude-oil production contracted, data released by the ministry of commerce showed.
The rate of manufacturing expansion fell to its lowest level since October 2022 even as it remained above its long-term average, the HSBC India PMI survey said. “Growth was reportedly curbed by fading demand for certain types of products,” it said.
“In a similar vein to the trend for output, new orders placed with Indian manufacturers rose sharply but to a lesser extent in December. The pace of expansion was the slowest seen in a year and a half,” it added.
Elsewhere, HSBC India PMI data showed a general lack of pressure on the capacity of manufacturers at the end of the third quarter.
“This was evidenced by only a marginal uptick in outstanding business volumes. Subsequently, employment was largely stable in December, with the respective seasonally adjusted index registering only fractionally above the 50.0 no-change mark,” the survey said.
“When assessing the year-ahead outlook for production, Indian manufacturers were at their most upbeat for three months,” it added.
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Omprakash Tiwary is a business writer who delves into the intricacies of the corporate world. With a focus on finance and economic landscape. He offers readers valuable insights into market trends, entrepreneurship, and economic developments.
