Manufacturing output down on Covid resurgence

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SME Times News Bureau | 05 Apr, 2021
Loss of growth momentum, due to a surge in Covid-19 cases as well as high input cost pressure, decelerated pace of new orders and production for India's manufacturing sector in March.

The IHS Markit India Manufacturing PMI report said that firms scaled up production and input buying in line with another upturn in sales, but employment decreased due to the pandemic curbs and a lack of pressure on capacity.

On the price front, the rate of input cost inflation was among the strongest seen over the past three years, the report said. However, selling prices increased only moderately as companies limited their adjustments to retain a competitive edge and boost sales.

Consequently, the headline seasonally adjusted IHS Markit India Manufacturing Purchasing Managers' Index (PMI) fell from 57.5 in February to a seven-month low of 55.4 in March.

The PMI ranges between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month.

"However, the latest reading was indicative of a substantial improvement in the health of the sector that outpaced the long-run series average."

According to the report, goods producers indicated that strengthening demand and the receipt of orders in bulk underpinned a further rise in overall sales.

The upturn was the eighth in successive months and sharp, despite softening to a seven-month low, the report said.

Similarly, factory production expanded at a sharp, albeit slower, pace. Those companies that signalled growth mentioned higher new work intakes. The upturn was reportedly restricted by the Covid-19 pandemic.

Besides, new export orders increased further in March, stretching the current sequence of growth to seven months.

"After starting 2021 on a stronger footing than it ended 2020, the manufacturing sector lost further growth momentum in March. Production, new orders and input buying expanded at softer rates. However, in all three cases, the increases were sharp and outpaced their respective long-run averages," said Pollyanna De Lima, Economics Associate Director at IHS Markit.

"With Covid-19 restrictions expanded and lockdown measures re-introduced in many states, Indian manufacturers look set to experience a challenging month in April."