The Indian manufacturing sector grew at its slowest pace in two years in October. The IHS Markit India PMI index - based on a survey of 400 producers - fell from 51.4 in September to a two-year low of 50.6 in October. Both factory orders and production rose at their weakest rates in two years. The employment scenario was dull as well, with job creation falling to a six-month low. Also, companies were reluctant to hold excess stock and lowered input buying in response.

The above figures deserve urgent attention. There is little doubt that weakening demand has adverse effect on the manufacturing sector in several ways, affecting its rate of production and employment. Adding to this woe, input costs declined for the first time in over four years and this is another sign of subdued growth conditions. It is also worth mentioning that in October business confidence slipped to its lowest level in over two-and-a-half years. These trends are not at all encouraging.

The latest manufacturing sector data came on the heels of release of the core sector output data for September. The Index of Eight Core Industries contracted over 5 percent against a marginal growth of 0.1 percent registered in the previous month. Barring fertilisers, all the other seven sectors contracted in September, and according to experts, such a low growth has not been witnessed so far in either 2011-12 base or the 2004-05 base series. This indicates the severity of the ongoing industrial slowdown.

While the Centre has been taking steps to arrest the slowdown and the RBI last month slashed its policy rates for the fifth time this year, success still seems elusive. There is little doubt that credit supply to the economy is still very poor with the NBFC sector witnessing a problem with its own funding. Additionally, the cost of credit, too, remains a concern with weak transmission of monetary policy. These challenges must be addressed to arrest the ongoing industrial slowdown.

I invite your opinions.