India’s manufacturing sector growth declines in Mar, a 5-month low

The Dollar Business Bureau

After remaining positive for the eight consecutive months, manufacturing sector activity in India declined in March to a low of five months, as the fresh business orders grew at a slower pace, and companies showed reluctance for recruitment, according to a private survey.                                                                                                                                                                                      

The Nikkei India Manufacturing Purchasing Managers Index (PMI) declined to a five-month low of 51 in March from 52.1 in February.

“This indicated the slowest improvement in operating conditions recorded by the survey since last October,” Nikkei said in a statement. 

This is consecutively for the eighth months that the PMI remained above the mark of 50-point.

In PMI parlance, a reading above the 50 point mark means growth, while below that mark shows a contraction. 

Commenting on the findings, Aashna Dodhia, Economist at IHS Markit and author of the report, said, “India's manufacturing sector continued to grow, albeit at the weakest pace since October, reflecting weaker gains in new business and a decline in employment for the first time in eight months.” 

There would be a limited impact of the US tariffs on aluminium and steel on India, as the country’s exports to the US in both the metals makes up for nearly 0.4% of the overall merchandise exports, stated Dodhia.

While there is an increase in new export orders during the said month, Dodhia said, “On a negative note, further advances in trade disputes could potentially weigh on sales to international clients.” 

Job creation declined for the first time in the past eight months as the companies reduced their numbers of payroll, although at a marginal pace. 

“Manufacturers operating in consumption and intermediate market groups signalled no appetite for recruitment,” Dodhia said.

In the meantime, the business sentiment continued to be weak, indicating some concerns about business prospects in the coming 12 months. 

“Indeed, amid a slower expected pace of recovery in consumer spending, IHS Markit marginally downgraded its real gross domestic product (GDP) forecast to 7.3% for 2017-2018 fiscal,” said Dodhia.