India’s factory activity gains momentum despite job losses

Despite having massive job losses for last six months in the country, India’s factory activity gathered momentum in September, even after returning to expansion territory in August.

However, the manufacturing sector also witnessed an expansion of over an eight and a half-year high in the same month as coronavirus lockdowns lifted restrictions that resulted in a surge in demand as well output, according to a private survey which showed on Thursday.

The Nikkei Manufacturing Purchasing Managers’ Index or PMI compiled by IHS Markit, jumped to 56.8 in September from 52.0 in August, above the 50-level separating growth from contraction for a second straight month.

"It was the highest reading since January 2012 and the increase was sharp and the third-quickest in the history of the survey. Similarly, there were back-to-back increases in new business inflows as well," the survey said.

Commenting on the latest findings, Pollyanna De Lima, Economics Associate Director at IHS Markit also said, "Indian manufacturing industry continued to move in the right direction, with PMI data for September highlighting many positives. Due to loosened Covid19 restrictions, factories went full steam ahead for production, supported by a surge in new work."

Despite the significant rebound, firms cut staff for the sixth month in a row. Coronavirus-related distortions have already made millions jobless in almost all sectors, baring a few ones. However, the survey further noted that mployment has now decreased for six consecutive months.

"Despite strong growth of order book volumes, Indian goods producers signalled another reduction in payroll numbers. In many cases, this was attributed to efforts to observe social distancing guidelines," Lima noted.

On the price front, the survey also observed that there was a softer and historically weak  rise in input costs.

"Firms reported higher prices paid for a few materials such as aluminium and steel. Output charges, meanwhile, broadly stabilised following five successive months of reduction. Almost one-third of manufacturers expect output growth in the coming 12 months, against 8 per cent that foresee a contraction, resulting in the strongest degree of overall optimism in over four  years," it said.


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