Business activity in India’s manufacturing sector lost steam in March, showed the latest data by IHS Markit. The headline Purchasing Managers’ Index (PMI) fell to a seven-month low of 55.4 in March impacted by subdued growth in new orders. In February, the manufacturing PMI stood at 57.5.
A reading above 50 indicates expansion, below the threshold stands for contraction. It should be noted that the index remains in the expansion zone for the eighth-month in a row. However, India has underperformed other Asian peers, who have seen an increase in manufacturing PMI in March. Further, the rising caseloads and fresh restrictions, especially in the key state of Maharashtra, could affect the near-term recovery outlook.
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Premium Darren Aw, Asia economist at Capital Economics Ltd, highlights, given that the PMI surveys are usually conducted around the middle of every month, today’s release is unlikely to have fully captured the impact of the continued surge in new virus cases over the past couple of weeks.
According to Aw, the broader impact of the reintroduction of containment measures on incomes, as well as voluntary social distancing, will still be a drag on the manufacturing recovery.
In a notification issued on Sunday, the Maharashtra government said all cinemas, theatres, malls, bars, gardens and playgrounds will remain closed. However, it allowed manufacturing firms to continue to operate. These restrictions will begin from 8pm on Monday and will be in force till 30 April, 2021.
The PMI survey report continued to paint a grim picture as far as employment is concerned. It said that the employment sub-index declined in March, taking the current sequence of job shedding to a year. The rate of contraction was modest, but the quickest since September 2020. Panelists indicated that the fall stemmed from covid-19 restrictions related to workforces, added the report.
Consequently, business confidence waned in March. While some firms foresee output growth in the coming 12 months, the vast majority predicted no change from present levels.
Meanwhile, worried over the second wave of coronavirus infections, the Indian stock markets saw a sharp decline on Monday. Key benchmark indices, the Nifty and the Sensex, lost around 2% each.
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