In April, business conditions in India's manufacturing sector remained favorable, as companies increased production in response to increased demand. Though production and sales grew at the slowest rates since August as the COVID-19 crisis worsened, foreign orders increased at a faster pace.
While manufacturing jobs continued to decline in April, the rate of contraction was marginal and the slowest in the current 13-month series of job losses.
The seasonally adjusted IHS Markit India Manufacturing Purchasing Managers' Index® (PMI®) was 55.5 in April, unchanged from March's reading of 55.4 and suggesting that the sector is doing well.
Consumer goods outperformed capital goods, capital goods outperformed intermediate goods, and intermediate goods outperformed consumer goods.
New orders and production increased at marked rates at Indian factories, but at the slowest pace in eight months. The COVID-19 pandemic hampered development, which was due to an increase in demand and marketing efforts.
In April, new export orders rose for the eighth month in a row, and at the fastest pace since October 2020. The increase was linked to an increase in international demand for Indian products, with all three sub-sectors monitored showing growth.
Input prices have risen at the fastest rate since mid-2014, according to manufacturers. Anecdotal evidence suggests that chemical, electricity, metal, plastic, and transportation costs have risen. As a result, factory gate fees rose even further. The rate of inflation was rapid, the highest in seven and a half years.
Meanwhile, there was another drop in finished goods inventories as companies reportedly used existing inventories to meet sales requirements. Some companies have attributed the drop in postproduction stocks to a scarcity of raw materials.
Commenting on the latest survey results, Pollyanna De Lima, Economics Associate Director at IHS Markit, said: "The PMI results for April showed a further slowdown in rates of growth for new orders and output, both of which eased to eight-month lows amid the intensification of the COVID-19 crisis. Still, the increases were strong by historical standards and the survey revealed other positive news."
"The headwinds facing manufacturers cannot be ignored, however. The surge in COVID-19 cases could dampen demand further when firms' financials are already susceptible to the hurdle of rising global prices. April saw the steepest increase in input costs for nearly seven years drive the sharpest upturn in output charges since October 2013. Data for the coming months will be important at verifying whether client demand is resilient to these challenges or if producers will have to further absorb cost burdens themselves to secure new work," he added further.