Fears of pandemic puts the brakes on manufacturing growth in Feb2 min read . Updated: 02 Mar 2020, 11:49 PM IST
- PMI for India declined from 55.3 in January to 54.5 in February; the reading was at 52.7 in December
- Survey members worried about the negative impacts of coronavirus epidemic on exports and supply chains
NEW DELHI: After touching an eight-year high in January, India’s manufacturing sector growth slowed in February due to the worries over the impact of the Covid-19 outbreak on exports and supply chains, according to a private survey released on Monday.
The manufacturing Purchasing Managers’ Index (PMI) for India declined from 55.3 in January to 54.5 in February. The reading was at 52.7 in December.
A figure of above 50 indicates expansion, while a sub-50 print signals contraction.
The survey by data analytics firm IHS Markit tracked new orders, output, jobs, suppliers’ delivery time, and stocks of purchases for around 400 manufacturers.
“Factories in India continued to benefit from strong order flows in February, from both the domestic and international markets. However, alarm bells are ringing for Indian goods producers as the Covid-19 outbreak poses threats to exports and supply chains. Businesses became less confident about the year-ahead outlook for output, in turn restricting hiring activity," said Pollyanna de Lima, principal economist, IHS Markit.
HDFC Bank chief economist Abheek Barua said since India gets 14% of its imports from China, slowdown in imports of inputs could have an impact on domestic production, as India has a high dependency on China for manufacturing inputs. “In relative terms, India seems insulated from the virus and could emerge as an alternative global sourcing base for a number of commodities such as textiles, furniture, etc. However, limited production capacity and competition from Vietnam and Cambodia in the replacement buying space act as constraints," he added.
India’s economic growth had slowed to an over six-year low in the December quarter, growing at 4.7%. And, there has been no clear sign of a recovery in sight. Manufacturing (-0.2%) and investment demand (-5.2%) contracted for the second consecutive quarter.
In February, India’s goods and services tax (GST) collection crossed the ₹1 trillion mark for the fourth straight month, even though total collections were a tad lower compared to January. India’s top carmakers reported lower sales in February as they prepared for the shift to meet the stringent Bharat Stage-VI emission norms, while battling supply chain challenges due to the coronavirus epidemic.
Data released by Maruti Suzuki India Ltd, Hyundai Motor India Ltd, Mahindra and Mahindra Ltd (M&M) and Tata Motors Ltd showed total sales of 197,080 vehicles for the month, down 12% from 224,241 units sold a year-earlier.
Bank credit growth declined to 8.5% in January from 13.5% in the year-ago period, led by a sharp slowdown in loans to the services sector, according to the Reserve Bank of India’s latest data.
The PMI survey said manufacturing production increased at a similar pace to January’s 91-month high, as firms reacted positively to new business gains and favourable market conditions. “Growth was led by consumer goods makers, followed closely by intermediate goods producers," it added.
“Although manufacturers expect further increase in demand to support output growth in the year ahead, the degree of optimism weakened from January and was below its long-run average. Survey members were particularly worried about the negative impacts of the coronavirus on exports and supply chains," IHS Markit said in a statement.