Market Report India: Manufacturing sector grows for fourth month

The Indian manufacturing sector grew for the fourth month in a row in April on surge in new business orders but the pace of expansion was same as the previous month and job growth moderated, a monthly survey recently showed.

Input costs rose for the 19th straight month for manufacturers, amid indications that persisting inflationary pressure may force the Reserve Bank to continue with its neutral monetary policy stance, to which the central bank recently shifted from an earlier accommodative mode.

The Nikkei Markit India Manufacturing Purchasing Managers Index (PMI) — an indicator of manufacturing activity — matched the reading for March of 52.5 in April as well.

Steady growth

A reading above 50 indicates expansion, while a score below this mark means contraction.

Though the upturn in order books was ‘most pronounced’ since last October and new export orders rose for the third month in a row, the rate of factory output growth eased from March.

April is the fourth straight month in which the manufacturing sector registered a growth after the demonetisation-induced contraction at the end of 2016.

Market Report

Indian Machine Tool Market to Grow

“Buoyant domestic demand coupled with sustained growth of new orders from abroad boosted the upturn in total new business received by Indian manufacturers in April,” said Pollyanna De Lima, Economist at IHS Markit and author of the report.

On inflation, it said purchasing costs increased for the 19th consecutive month in April. Meanwhile, less than 5 per cent of manufacturers raised their output prices in April, while almost 93 per cent signaled no change.

The Reserve Bank in its monetary policy review meet on April 6 kept the repurchase or repo rate — at which it lends to banks — unchanged at 6.25 per cent but increased reverse repo rate to 6 per cent from 5.75 per cent. Scratching beneath the surface we can see that consumers were the key drivers of growth as consumer goods producers registered by far the steepest expansions in both production and new orders,” Lima said.

Lima further noted that Indian manufacturers believe output is expected to remain on an upward trajectory amid reports of planned capacity expansions, new product launches, aggressive marketing campaigns and an improving economic scenario.

Interview

India is a major market for the machine tool industry

(ID:44698252)