Good news for India’s manufacturing sector
India’s economy received a boost in July, with a new report showing its manufacturing sector saw sales and production grow at the fastest rate since November 2021.
The S&P Global India Manufacturing Purchasing Managers’ (PMI) Index hit 56.4 during the month, up from a nine-month low of 53.9 in June. A reading of 50 on the PMI indicates no change in level of activity from the previous month and the Survey-based index suggested ‘marked gains’ in new business orders during July.
Although costs continued to rise, the inflation rate in manufacturing inputs eased to an 11-month low, the report said. However, chemicals, electronic components, metals, textiles and transportation costs were higher during the month.
“Inflation rates, for both input prices and output charges, were most acute in the capital goods segment. The weakest rises were noted in the intermediate goods sub-sector,” S&P Global said.
However, the figures show a slowdown in new export orders, which grew at the slowest rate for four months in July. It is the thirteenth month in a row that factory orders and production experienced growth.
Export orders slow
However, the improved figures in July have not led to increased optimism among producers, with 96% of them expecting no change in output levels over the coming year. This is only marginally better than June, when business sentiment had dropped to a 27-month low.
And 98% of firms have said they were not going to take on any more workers. “Despite the solid performance of the manufacturing industry, overall job creation remained subdued. The latest increase in employment was marginal and broadly similar to those seen in the current five-month sequence of growth,” said S&P Global.
Pollyanna De Lima, economics associate director at S&P Global Market Intelligence, said July marked a “welcome combination of faster economic growth and softening inflation” for producers. “Although the upturn in demand gained strength, there were clear signs that capacity pressures remained mild as backlogs rose only marginally and job creation remained subdued,” she said.
“Firms were successful in their efforts to obtain inputs amid a second consecutive improvement in supplier performance. This in turn supported a near-record increase in inventories of raw materials and semi-finished goods as well as a softer upturn in input costs,” she added.
‘No question of recession’
Union Finance Minister Nirmala Sitharaman has said there is no question of India getting into stagflation or recession like other major economies of the world.
Speaking in Parliament in a debate on cost-of-living increases, Sitharaman said: “We have never seen a pandemic of this kind. All of us were trying to make sure that people in our constituencies are given extra help. I recognise that everybody – MPs and state governments – have played their role. Otherwise, India would not be where it is compared to the rest of the world.”
The Finance Minister emphasized that due to the measures taken by the government, India is in a much better position than most countries.
She said: “Repeatedly in the assessment of global agencies, India remains the fastest growing economy in the assessment of global agencies. This House, irrespective of party, should feel proud of the country and its people. State governments have helped.”
Sitharaman noted that the Gross Domestic Product (GDP) of the US fell 0.9% in the second quarter following a 1.6% decline in the first quarter. “They start it calling an unofficial recession. There is no question of India getting into recession or stagflation,” said the Minister.
She said that despite the second wave of Covid-19, the invasion of Ukraine by Russia and crises in the supply chain, “we have held inflation well within 7% or below. That has to be recognised.”