Due to a modest weakness in both demand as well as output, India's factory output for the month of February slumped from January's eight-year high levels. The parameter decided basis the Nikkei Manufacturing Purchasing Managers' Index, compiled by IHS Markit declined to 54.3 from the January's figure of 55.3. The level above 50 indicates growth as against below-50 levels that highlight contraction.
"Factories in India continued to benefit from strong order flows in February, from both the domestic and international markets," Pollyanna De Lima, principal economist at IHS Markit, wrote in a release.
"The pick-up in demand meant that companies were able to further lift production and input buying at historically-elevated rates."
Also, at the same time while the new orders sub-index since its inception in March 2005 has remained above the long term average levels, it declined in February. Nonetheless, the sentiment in respect of foreign demand as well as optimism took a downward turn in the wake of coronavirus outbreak which is expected to create world-over slump.
The sentiment hence pushed hiring to its lowest level in 3-Months.
"Alarm bells are ringing for Indian goods producers as the COVID-19 outbreak poses threats to exports and supply chains.
Businesses became less confident about the year-ahead outlook for output, in turn restricting hiring activity," de Lima said. Also, retail inflation which is the key basis for the RBI's MPC to decide on interest rates in the economy may cool off given the decline in input as well as output charge.