India’s Manufacturing PMI Contracts For The First Time In 11 Months

A worker makes checks at an inspection line on the Innova Crysta compact multi-purpose vehicle (MPV) production line at the Toyota Kirloskar Motor Ltd. plant in Bidadi, Karnataka. (Photographer: Dhiraj Singh/Bloomberg)

A gauge of activity across India's manufacturing sector contracted for the first time since July last year amid disruptions caused due to the second wave of Covid-19 infections.

The IHS Markit India Manufacturing Purchasing Managers' Index stood at 48.1 in June compared with 50.8 in May, according to its media statement. A reading above 50 indicates economic expansion.

The intensification of the Covid-19 crisis in India had a detrimental impact on the manufacturing economy. Growth of new orders, production, exports and input purchasing was interrupted in June as containment measures aimed at bringing the pandemic under control restrained demand.

Pollyanna De Lima, Economics Associate Director, IHS Markit

The stretch of new order growth that started in August 2020 came to an end in June, with firms linking the deterioration in demand to the pandemic, according to the release. The pace of contraction, however, was much softer than those registered at the onset of Covid-19 last year, it said.

Falling new orders, business closures and the Covid-19 crisis triggered a reduction in output among Indian manufacturers. Demand weakness and lower production requirements led firms to restrict input purchasing in June. “Buying levels fell at a marked pace that was among the fastest seen since data collection started in March 2005,” the release said.

New export orders decreased for the first time in 10 months, albeit modestly, because of Covid-19 restrictions.

Input costs increased further in June, with firms reporting higher prices for chemicals, electronic components, energy, metals and plastics. Additional cost burdens were again transferred on to clients, with goods producers hiking their fees for the tenth straight month.

Jobs continued to be shed midway through the year. The fall in employment was marginal, but took the current sequence of month-on-month contraction to 15 months.

Business confidence was dampened in June by uncertainty over when the pandemic can be brought under control. Companies were least optimistic in almost a year.