Manufacturing activity increased in November from a two-year low in the previous month, driven by a modest increase in the growth of new orders and production, a private sector survey report showed.
The Nikkei India Manufacturing Purchasing Managers’ Index rose to 51.2 in November, up from 50.6 in October. A reading above 50 implies an expansion in activity, while a reading below 50 denotes contraction.
“Although business conditions in the Indian manufacturing sector improved in November, the upturn remained subdued compared to earlier in the year and the survey history,” the report said. “Growth rates for new orders and production were modest, despite accelerating from October’s recent lows, while firms shed jobs for the first time in 20 months and continued to reduce input buying.
“The latest reading was below the survey average (53.8) and indicated only a slight improvement in the health of the sector,” the report added.
The growth in the overall manufacturing sector was mainly propped up by growth in the consumer goods segment, while the intermediate goods segment returned to expansion. However, the survey respondents reported a deterioration in the operating conditions in the capital goods segment.
“Anecdotal evidence suggested that growth was supported by the launch of new products and better demand, though restrained by competitive pressures and unstable market conditions,” the report added.
“After pulling back noticeably in October, manufacturing sector growth displayed a welcoming acceleration in November,” Pollyanna de Lima, Principal Economist at IHS Markit, said. “Still, rates of expansion in factory orders, production and exports remained far away from those recorded at the start of 2019, with subdued underlying demand largely blamed for this.” Ms. De Lima added that the PMI data continued to show a lack of inflationary pressures in the sector which, combined with slow economic growth, suggested that the Reserve Bank of India would likely extend its accommodative policy stance and further reduce the benchmark interest rate during December.