India’s Manufacturing Activity Slows To Three-Month Low In May
India's manufacturing gauge expanded for the fifth straight month in May but fell to a three-month low on the back of sluggish growth in new orders as well as production.
The Nikkei India Manufacturing Purchasing Managers' Index (PMI)—compiled by Nikkei and research firm Markit—stood at 51.6 in May, compared to 52.5 in April. A reading below 50 indicates a contraction and a reading above it indicates expansion.
The upturn in the Indian manufacturing sector took a step back in May, with softer demand causing slower expansions in output and the amount of newwork received by firms. Moreover, there was a renewed decline in new export orders.Pollyanna De Lima, Economist, IHS Markit
Input costs rose at the slowest rate since last September, the report said. Incoming new work rose at the slowest pace since February led by a slowdown in consumer and intermediate goods categories as well as a contraction in order books of capital goods producers.
A decline in demand for Indian-manufactured goods led to a decline in new export orders after three months of growth.
A combination of new product launches, machinery acquisition and marketing campaigns to support output growth going ahead led to an improvement in business confidence for the month of May. The degree of optimism also climbed to a six-month high, the report said.
The GDP Slowdown
The national income data released on Wednesday showed India's gross value added (GVA) growth slowed down to 5.6 percent during the January-March period, capturing the revised series of the Wholesale Price Index and the Index of Industrial Production.
The new series showed that all major sectors with the exception of agriculture and public administration witnessed a sharp slowdown. Manufacturing sector growth also dropped to 5.3 percent during the quarter, compared to 8.2 percent in the October-December period.
Low inflation and a slowdown in growth is likely to prompt the Reserve Bank of India to return to its 'accommodative' policy stance so as to boost growth, the report said.
With inflation under control and manufacturing growth below par, we may see the RBI changing neutral monetary policy stance to accommodative in coming months in order to support the economy.Pollyanna De Lima, Economist, IHS Markit
Manufacturing jobs decreased in the month of May owing to lack of suitable labour. The fall in staff numbers was predominant in the intermediate goods category, the report said.
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