Home / Economy / India November factory activity growth hits 10-month high: PMI Survey

India's manufacturing activity grew at the fastest pace in 10 months in November, buoyed by a strong pick-up in demand, a private survey showed. Increasing from 55.9 in October to 57.6 in November, the seasonally adjusted IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) signalled the strongest improvement in the health of the sector for ten months. 

The reading was the highest since January and the fifth straight month above the 50-mark that separates growth from contraction. 

“The Indian manufacturing industry continued to expand in November, with growth gathering pace and forward looking indices generally pointing to further improvements in the months to come. The fact that firms purchased additional inputs at a stronger rate amid efforts to restock, combined with recurring declines in inventories of finished goods and tentative signs of a pick-up in hiring activity, indicate that production volumes will likely expand further in the near term," said Pollyanna De Lima, Economics Associate Director at IHS Markit.

New orders improved sharply - the strongest since February - mostly driven by domestic demand.

However, the key threat to the outlook, she said, in addition to potential new waves of COVID-19, is inflationary pressures. 

The survey pointed out that businesses were indeed worried that inflationary pressures could hamper demand and production in the year ahead.

For now, “companies are absorbing most of the additional cost burdens and lifting output charges only moderately. Should raw material scarcity and shipping issues continue to feed through to purchasing prices, substantial increases in output charges could be seen and demand resilience would be tested," said Pollyanna De Lima.

Meanwhile, data released on Tuesday showed India's economy expanded by 8.4% in the July-September quarter from a year earlier, but economists said disruptions from the emerging Omicron coronavirus variant risked slowing the recovery.

In a note, economists at Barclays pointed to the risks posed by the Omicron covid variant. “The PMI expansion was led by improvements in production and new orders, though cost pressures remain elevated. However, the survey was conducted before the emergence of the Omicron variant (12-24 November), so the data may not completely capture a possible increase in risk perceptions," they said.




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