NEW DELHI
The Indian manufacturing industry picked up growth in November, after slowing in October, as output gathered pace on strengthening client demand, more favourable input supply and boost in production volumes. Inflationary pressures retreated, with purchase costs rising at the weakest pace since the current sequence of increases began in August 2020, reflecting in the seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index which swung up from October’s eight-month low of 55.5 to 56.0 in November.
A key feature of the latest results was a substantial easing of price pressures. 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 even though that was the weakest in seven months. Manufacturers who hiked their fees, were fewer than 7 per cent of panellists and gained on demand strength, greater labour costs and the usage of higher-quality inputs in production processes. 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.”
Economics Associate Director at S&P Global Market Intelligence Pollyanna De Lima notes India’s manufacturing robustness 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,” points out De Lima. “Expanded capacities, rising workloads and the need to replenish stocks of finished goods collectively indicated that India’s manufacturing economy is clearly in good shape as 2023 draws to a close, with expectations for a continued strong performance in 2024” said De Lima.
November data showed another substantial increase in overall levels of new work received by Indian goods producers and the growth rate improved from October’s one-year low, outpacing the series average. Surveyed companies commonly reported positive demand trends, greater client requirements and favourable market conditions.
The trend for new export business showed signs of resilience, despite weakening in November. New export orders rose for the 20th month in a row and solidly, albeit at the slowest rate since June. On the upside, companies signalled higher intakes of new business from Africa, Asia, Europe and the US. With total new sales rising, demand conditions remaining positive and input supply relatively improving, Indian manufacturers scaled up production volumes. Output expanded sharply and at an above-trend pace.
Purchasing activity and stocks of inputs rose during November, in many cases owing to buoyant demand conditions. Finished goods inventories fell, however, as manufacturers found themselves digging into warehouses to fulfil sales requirements. Average vendor performance worsened only marginally in November, as 99 per cent of the panellists reported no change in delivery times since October. With regards to their own capacities, firms collectively signalled mild pressures. This was seen by a slight increase in outstanding business levels.
The outlook for India’s manufacturing sector 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. However, the overall level of positive sentiment slipped to a seven-month low amid rising inflation expectations.
The S&P Index results also reflects FICCI’s latest quarterly survey on manufacturing which reports accelerated momentum of growth in the second quarter of 2023-24, likely to continue for the subsequent quarters of FY 2023-24 as well, notwithstanding slowdown in developed nations. In the Q1 April-June 2023-24, 57 per cent of respondents reported higher production levels compared to the over 79 per cent of the respondents in the latest survey who shared higher level of production in Q2FY24. This assessment is also reflective in order books as 80 per cent of the respondents in Q2 have had higher number of orders and demand conditions continue to be optimistic in Q-2 as well.