The manufacturing sector started fiscal 2022-23 with a bang. The Purchasing Managers’ Index (PMI) for April rose to 54.7 from 54 in March. However, not much change is seen on the jobs front. Also, price pressure has gone up.

This data has been released a day after the Finance Ministry reported an all-time high GST collection at Rs 1.68 lakh crore in April. Since GST data is related to consumption in March, a better manufacturing scenario in August indicates that higher collections will continue.

Factory activity picked up in the month, bolstered by a solid increase in demand as pandemic restrictions were eased, but rising energy prices pushed input costs to a five-month high, a private survey showed.

International demand also jumped to a 9-month high after contracting in March, and domestic demand was above average.

The Manufacturing Purchasing Managers' Index compiled by S&P Global improved to 54.7 in April from 54.0 in March.

It beatReuters poll expectation for 53.8 and was above the 50-mark, which separates growth from contraction, for the tenth consecutive month.

"Factories continued to scale up production at an above-trend pace, with the ongoing increases in sales and input purchasing suggesting that growth will be sustained in the near-term," noted Pollyanna De Lima, economics associate director at S&P Global.

That optimism was underpinned by an easing of Covid-19 restrictions, but a recent spike in coronavirus cases and an electricity shortage could impair industrial activity in the coming months.

Indeed, the level of business expectations have remained subdued compared to past trends. While some firms have predicted better growth in the next 12 months, others indicated the outlook was difficult to predict.

Firms hired more workers in April, but the rise was marginal from March.

Input costs rose at their fastest pace since November, aggravated by higher transportation costs and commodity prices, owing to disruptions due to the Russia-Ukraine war.

The additional cost was shared by consumers as in previous months and the prices charged rose at their sharpest pace in a year.

"A major insight from the latest results was the intensification of inflationary pressures as energy price volatility, global shortages of inputs and the war in Ukraine pushed up purchasing costs," added De Lima.

"This escalation of price pressures could dampen demand, as firms continue to share additional cost burdens with their clients."

The Reserve Bank of India is expected to raise its key interest rate in June and opt for a steeper rate hike path to tame inflation.

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