High input costs continue taking a toll on India's mfg sector

Increasing inflationary pressures and supply chain bottlenecks remain a cause of concern for the manufacturing sector, which saw a contraction of 0.2% on an annual basis in May.

GDP data showed that India’s economy grew by a modest 4.1% in Q4FY22, down from 5.4% in the previous quarter. Indian economy’s pace of recovery slowed down owing to global supply bottlenecks caused by the Russia-Ukraine conflict and higher input costs.

While the overall industrial activity in the fourth quarter registered a growth, the manufacturing sector remained the sole laggard.

"The contraction in the manufacturing sector - that struggled with supply bottlenecks and high input prices- in the last quarter of FY22 is a cause of concern,” Rajani Sinha, Chief Economist, CareEdge said. Sinha added that high input prices will continue to negatively impact manufacturing sector.


The S&P Global India Manufacturing PMI data on Wednesday pointed to a sustained recovery across the sector. However, input costs rose for the twenty-second successive month in May, with companies reporting higher prices for electronic components, energy, freight, foodstuff, metals, and textiles.

Data shows that business sentiment was dampened by inflation concerns in May, with the overall level of confidence the second-lowest in just over two years.

“While firms appear to be focusing on the now, the survey's gauge of business optimism shows a sense of unease among manufacturers. The overall level of sentiment was the second-lowest seen for two years, with panellists generally expecting growth prospects to be harmed by acute price pressures,” Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said.