Growth in manufacturing activities in the country slowed in August as input costs increased and concerns surrounding the damaging impact of Covid-19 on demand and firms’ finances dampened business confidence, a private survey showed on Wednesday.
The IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) was at 52.3 in August, down from 55.3 in July, indicating a softer rate of growth that was subdued in the context of historical survey data.
A reading above 50 on the index indicates expansion and below that shows contraction.
Uncertainty regarding growth prospects, spare capacity and efforts to keep a lid on expenses led to a hiring freeze in August, following the first upturn in employment for 16 months in July.
As per the survey, manufacturing production increased for the second straight month in August amid reports of improved sales and demand. However, growth was curbed by the pandemic and elevated price pressures.
“August saw a continuation of the Indian manufacturing sector recovery, but growth lost momentum as demand showed some signs of weakness due to the pandemic,” said Pollyanna De Lima, economics associate director at IHS Markit. “Yet, factory orders and output rose across the consumer, intermediate and investment goods categories.”
New orders also rose for the second straight month, but at a softer pace. Some firms suggested that favourable market conditions and fruitful advertising boosted demand for their goods.
August data pointed to back-to-back increases in new export orders, but here too growth lost momentum. India’s economy expanded 20.1% on-year during the first quarter of FY22, helped by a low base and smaller-than-expected sequential loss due to the second wave. Manufacturing expanded 49.6%.
Indian manufacturers signalled another monthly rise in cost burdens, thereby taking the current stretch of inflation to 13 months with cost pressures linked to raw material scarcity and transportation problems.
Employment levels were broadly stagnant in August as companies reportedly had sufficient workforces to cope with current requirements and confidence remained subdued.