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Photo: Bloomberg
Photo: Bloomberg

Factories hum again as output expands in Sep

  • Exports and sales back on track, industries go full steam ahead with production
  • Manufacturing output expanded to its highest level in more than eight years in September

India’s economy showed fresh signs of recovery in September after an initial rebound from pent-up demand, as the country reopened in June after a strict lockdown tailed off.

Manufacturing output expanded to its highest level in more than eight years in September supported by quicker increases in new export orders and domestic sales, following the gradual easing of coronavirus restrictions, according to a private survey.

The purchasing managers’ index (PMI) for manufacturing rose to 56.8 in September from 52 in August, the highest mark since January 2012, according to data analytics firm IHS Markit. A figure above 50 indicates expansion.

Factories went full steam ahead in September, said Pollyanna De Lima, economics associate director at IHS Markit. “Exports also bounced back, following six successive months of contraction, while inputs were purchased at a sharper rate and business confidence strengthened," she added.

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The surge in factory activity could be partly attributed to firms ramping up production to meet festive demand and exporters recapturing markets that collapsed when countries locksed down. CARE Ratings chief economist Madan Sabnavis, however, cautioned against an overly optimistic interpretation of the survey number. It cannot be compared with similar levels in the past when the economy was booming, he said. “The improvement in PMI manufacturing was expected as it shows improvement month-on-month, which corresponds with the unlock process. There is definitely progress, but it cannot be equated with say IIP (Index of Industrial Production) growth, which will most likely be negative in September albeit at a single-digit level," he added.

One area where the recovery in the manufacturing sector still lags behind is employment, De Lima noted. “Some companies reported difficulties in hiring workers, while others suggested staff numbers had been kept to a minimum amid efforts to observe social distancing guidelines. When we look at the PMI average for the second quarter of FY21, the result is in stark contrast to that seen in the first: a rise from 35.1 to 51.6. While uncertainty about the pandemic remains, producers can at least for now enjoy the recovery," she said.

India’s economy contracted by a record 23.9% in the June quarter. Most economists expect Asia’s third-largest economy to contract in double digits in FY21.

The upturn in total sales was supported by a renewed expansion in new export orders.

Mint reported on 25 September that India’s outbound shipments are showing signs of a turnaround for the first time in seven months with merchandise exports expanding 8.3% in the first three weeks. However, a second wave of covid in many European economies may threaten a nascent recovery in external demand for Asia’s third-largest economy.

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