Manufacturing activity remained unchanged in September compared with the level in August, although the sector witnessed some expansion during both months, according to a private sector survey.
The Nikkei India Purchasing Managers’ Index registered a value of 51.2 in September, the same as in August.
A reading above 50 indicates an expansion in activity, while one below 50 denotes a contraction.
“September saw a sustained expansion in the Indian manufacturing sector, supported by increases in both output and new orders,” IHS Markit said in the survey release. “However, the rates of expansion eased slightly in both cases.”
The survey, however, showed that the sector’s performance was still well below the long-term trend.
“The reading was indicative of a modest improvement in manufacturing sector business conditions in September, and one that was below the long-run trend (54.1),” the report said. “The PMI has now registered above 50 for two successive months. Growth in the consumer and intermediate goods categories offset a contraction in the investment goods sector.”
IHS Markit said that the main reason cited by companies witnessing an increase in new order inflows was stronger demand, while those who saw slowing orders said it was due to the negative impact of the Goods and Services Tax.
‘Continued recovery’
“September data painted an encouraging picture as the sector continued to recover from the disruptions caused by the introduction of the GST in July,” Aashna Dodhia, economist at IHS Markit and the report’s author wrote. “This sustained amelioration reflected expansions in new work and output, supported by stronger domestic demand conditions.”
“The lingering effects of recent economic shocks continue to cast a shadow on economic growth as IHS Markit downgrades its real GDP growth forecast to 6.8% for fiscal year 2017-18,” Ms. Dodhia added.
Respondents are asked whether the situation has become better, worse, or has remained the same regarding parameters such as new orders and output. An identical score shows that respondents have answered the same way in both months and has no bearing on the actual output levels.