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The clouds on the economic horizon darkened on Tuesday, with factory output, too, showing signs of slowing down. The overall GDP growth and core industry output figures put out on Monday had not been rosy.
A Nikkei India Manufacturing Purchasing Managers’ Index (PMI) survey found that the manufacturing sector slowed a bit in August, with the index easing to 52.3 from 52.7 in July. With this, pressure is sure to mount on the Reserve Bank of India to cut the key policy rate.
The PMI is prepared on the basis of responses of purchasing executives in over 300 companies in the manufacturing sector. An index number over 50 reflects expansion, while anything below that reflects a contraction.
Commenting on the latest data, Pollyanna De Lima, Economist at Markit, said that manufacturing had faltered in August as both domestic and foreign demand had softened.
Rebound expected But she expects a sharp increase in buying levels coupled with a record drop in stocks of finished goods to lead to a rebound in coming months.
“Falling global commodity prices resulted in an overall reduction in cost burdens. This provided companies with more room for price negotiations and tariffs were lowered, on average. As inflation concerns fade and demand growth loses momentum, a further accommodative policy should not be discounted,” she said.
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