India’s manufacturing industry started the year 2021 on a strong note with Manufacturing Purchasing Managers Index (PMI) for the month of January at 57.7, reflecting the strongest improvement in three months, according to the latest survey by IHS Markit.

Manufacturing PMI in December 2020 and November 2020 came in at 56.4 and 56.3, respectively.

In response to faster expansions in total sales and new export orders, companies scaled up production at the quickest pace in three months. While employment fell further, job shedding moderated, the Survey showed.

Sustained sales growth supported a further upturn in manufacturing sector output in January. The rise in production was the sixth in successive months and the quickest since last October.

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Firms noted a faster expansion in new business inflows at the start of the year, the quickest in three months. Anecdotal evidence pointed to higher sales to new and existing clients as well as the securing of bulk orders.

New orders and output rose across each of the three broad areas of the manufacturing sector. For both measures, rates of expansion picked up at consumer and capital goods firms but eased at intermediate goods makers.

New export orders

Aggregate new export orders continued to increase in January, taking the current stretch of growth to five months. Moreover, the pace of expansion was solid and quickened from December.

Despite the pick-up in demand, jobs in the manufacturing sector plunged in January. The pace of contraction was modest, however, and the slowest in the current ten month sequence of reduction. Companies that refrained from hiring mentioned the observance of government norms to keep workers to a minimum.

Pollyanna De Lima, Economics Associate Director at IHS Markit, said: “The Indian Manufacturing PMI remained well inside positive territory in January, signalling a sixth consecutive improvement in business conditions and moving further away from the Covid-related contractions recorded around mid-2020.”

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Lima said, “Factories continued to ramp-up production at an above- trend pace, and the sustained upturn in new work intakes suggests that there is room for capacity expansion in the near term. Jobs fell at the start of the year, but did so at the weakest pace in the current ten-month stretch of contraction.”

“An important insight from the January survey was a pick-up in inflationary pressures, as lingering supply-side squeeze drove the sharpest increase in purchasing costs for over two years. The favourable demand environment was accommodative of price hikes and charges were raised at the fastest pace in over a year.”

Lima dded, “Companies cheered the roll-out of Covid-19 vaccines and became optimistic towards growth prospects, a position that is supportive of investment and job creation as businesses attempt to rebuild their inventories of finished goods and meet demand needs.”

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