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Last updated: 07 May, 2019  

Manufacturing.Border.Thmb.jpg Manufacturing, services sectors' worries

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Bikky Khosla | 07 May, 2019

India's manufacturing sector's performance eased to an eight-month low in April. The Nikkei India Manufacturing Purchasing Managers’ Index registered a reading of 51.8 in April, against the 52.6 in March. According to the report, a softer increase in new orders created a domino effect in the sector, restricting growth of output, employment, input buying and business sentiment. This softening manufacturing expansion suggests that producers are hardly gearing up for a rebound.

The services sector's performance was also not encouraging in the month. According to the Nikkei India Services Business Activity Index, weak demand conditions hit the sector, with rates of new business and output growth both cooling to seven-month lows. The seasonally adjusted index dropped to 51 in April from 52 in March, the weakest upturn in output since last September. According to the report, competitive conditions and a shift towards online bookings among customers reportedly restricted new business gains and in turn growth of activity.

Much of the slowdown in both the sectors can be attributed to disruptions arising from the elections, but at the same time it seems voting is not the only reason. In the service sector, weak demand is a concern while in the manufacturing sector, new business growth moderated reportedly due to a challenging economic environment. So the new government will have to work hard to deal with these challenges. Additionally, considering lack of inflationary pressures, the RBI may go for a further rate cut in its next monetary policy meeting.

Meanwhile, according to a new report published by the Finance Ministry, India's economy slowed down slightly in the last fiscal and dull export is one of the major factors the contributed to the slowdown. There is little doubt that a healthy performance by the export sector is a must for sustained growth of the Indian economy, and the new government will have to work in this direction also if it wants to ensure healthy growth for India in the coming days.

I invite your opinions.

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