As GDP improves, manufacturing sector growth hits 13-month high in November: All you need to know

Published On: 01, Dec 2017 | Source:

As India’s economy swings back into the recovery mode after 15 months of slowdown, the manufacturing sector in November also recorded the strongest improvement in business activity in 13 months as new orders picked up supported by the reduction in GST rates and strong demand conditions, a monthly survey said today. The Nikkei India Manufacturing Purchasing Managers’ Index (PMI) rose from 50.3 in October to 52.6 in November indicating a substantial improvement of operating conditions in the country’s manufacturing sector.

Here’s all you need to know about India’s manufacturing sector growth:

1. The Manufacturing PMI is an indicator of the economic health of the manufacturing sector, which surveys 400 purchasing managers in the manufacturing sector to analyse a country’s manufacturing demand.

2. The indicator’s 50 mark separates expansion from contraction. Any country going beyond the 50 mark shows an expansion in manufacturing activities and below 50 mark shows contraction.

3. Survey respondents said a combination of higher order book volumes and a decrease in GST rates largely contributed to greater production. “Growth in output and new orders picked up to the fastest since October 2016, reportedly supported by reductions in GST rates and stronger underlying demand conditions,” said Aashna
Dodhia, Economist at IHS Markit and author of the report.

4. According to the survey, stronger factory production levels translated into the fastest rate of employment creation since September 2012. Besides, exports growth rose for the first time in three months as overseas demand for Indian goods improved.

5. The input cost inflation quickened to the fastest since April, but firms were unable to fully pass on higher cost burdens to price-sensitive clients, the survey report said. “Underlying data indicated that the central bank is less likely to adopt an accommodative stance as input cost inflation intensified to the fastest since April,” the report noted.

In a major boost for Narendra Modi’s Gujarat state election campaign, India’s GDP growth sharply rebound to 6.3% in fiscal second quarter July-September from a three-year low in the first quarter, as businesses sprung into economic activity ahead of a condensed festive season and accelerated production to build inventory after the implementation of GST. India’s GDP growth in the second quarter (Jul-Sep) accelerated to 6.3% from 5.7% in Apr-Jun and 6.1% in Jan-Mar