India’s manufacturing sector continued to perform better with S&P Global Purchasing Managers’ Index (PMI) rising to 56 in November against 55.5 in October. While strong demand and better input availability buoyed manufacturing, employment situation was also a tad better.

On Thursday, Statistics Ministry data showed strong GDP growth at 7.6 per cent on the back of high performance by manufacturing during July-September quarter. Expectation is that this trend will continue, and the first indication post GDP number was the PMI rising to 56, data released on Friday showed. This index is based on responses from executives of 400 companies. Index above 50 means expansion and below 50 means contraction.

“India’s manufacturing industry maintained its robust performance in November, with output regaining growth momentum. Firms’ ability to secure new business, both domestically and from abroad, remained central to the success of the sector,” Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said.

An important observation was lower inflation in November. Participants in survey said although average purchasing costs rose again, the rate of inflation eased to the lowest in the current 40-month sequence of increases and was negligible by historical standards. Rising costs translated into increased selling prices, albeit one that was the weakest in seven months. Manufacturers that hiked their fees, which were fewer than 7 per cent of panellists, mentioned demand strength, greater labour costs and the usage of higher-quality inputs in production processes.

It may be noted that retail inflation based on Consumer Price Index (CPI) in October was 4.9 per cent while producers’ inflation based on Wholesale Price Index (WPI) remained in the negative zone at 0.52 per cent. November print for both inflations will be out on December 12 and 14 respectively. Economists differ on whether the present trend in both inflation numbers will continue. One view is that inflation will rise in coming months.

“Prices for raw materials and components still rose in November, but improved availability at suppliers amid subdued global demand for inputs led to a considerable retreat in cost pressures. Some concerns over prices increasing in the near-term were reflected in the data for business sentiment, but there was also a softer uptick in output charges amid a reduced inflationary environment.” De Lima said.

Job creation

Good news is on the job creation front. The survey report highlighted that manufacturing employment in India increased for the eighth successive month heading towards the end of the 2023 calendar year. “New work in the pipeline and a healthy demand environment spurred recruitment, anecdotal evidence showed. Growth ticked higher, but was moderate overall,” it said.

Further, the outlook remained favourable in November, with firms seeing opportunities in the form of demand strength, marketing initiatives and new clients making enquiries about a wide range of products. “The overall level of positive sentiment slipped to a seven-month low amid rising inflation expectations,” the report said.

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