India's manufacturing activity strengthened in December, rising to its highest level since October 2020.
The India Manufacturing Purchasing Managers' Index stood at 57.8 in December, up from 55.7 in November, according to a media statement by IHS Markit. A reading above 50 indicates expansion.
The PMI average for the third fiscal quarter (56.3) was the highest recorded since one year ago. Demand resilience boosted sales growth in December, with the rate of increase picking up to the quickest since February 2021, the release said. The rise was led by demand strength and aided by advertising, product diversification, and favourable economic conditions that supported sales. International demand for Indian goods also improved, but to a lesser extent than in November.
With overall demand remaining conducive to growth, manufacturers scaled up production at the end of 2022. The upturn in output was sharp and the best seen since November 2021.
"While some may question the resilience of the Indian manufacturing industry in 2023 amid a deteriorating outlook for the global economy, manufacturers were strongly confident in their ability to lift production from present levels," Pollyanna De Lima, economics associate director at S&P Global Market Intelligence, said.
Suppliers to the Indian manufacturing sector were comfortably able to accommodate the uptick in input demand, with average lead times unchanged from November. Manufacturers themselves faced mild pressures on their operating capacities, as signalled by a further, albeit slower, increase in outstanding business.
To address backlogged work, Indian goods producers hired additional staff at the end of the year. The latest increase in employment was the 10th in a row, but was the slowest since September.
Cost pressures remained relatively muted in December, with the overall rate of inflation little changed from November and the second-slowest since September 2020. Underlying data indicated that price reductions for some raw materials partly offset increases elsewhere. On the other hand, there was a solid and quicker upturn in factory gate charges during December. Moreover, for the first time in close to two-and-a-half years, the rate of inflation for selling prices outpaced that seen for input costs.
When assessing the year-ahead outlook for production, companies were optimistic. Advertising and demand buoyancy were cited as the key opportunities for growth prospects.
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