Manufacturing in Oct grows fastest in 13 yrs2 min read . Updated: 03 Nov 2020, 07:00 AM IST
- Production activity improves to the strongest since mid-2008
The Indian economy continued to gain steam in October, shaking off the effects of the pandemic-induced downturn, as manufacturing activity rose to the highest level in 13 years.
The IHS Markit India purchasing managers’ index (PMI) for manufacturing increased to 58.9 in October from 56.8 in the previous month, a positive signal for overall economic growth in the fiscal third quarter. Readings above 50 indicate expansion from the previous month.
Firms boosted production at the strongest pace recorded since late-2007 while the upturn in sales was the strongest since mid-2008.
The economy picked up speed in September as demand for mobile phones, home appliances and cars surged after a prolonged slump during the festive season when consumers usually make big-ticket purchases.
Companies are convinced that the resurgence in sales will be sustained in the coming months, as indicated by a strong upturn in input buying, said Pollyanna De Lima, economics associate director at IHS Markit.
“Levels of new orders and output at Indian manufacturers continued to recover from the covid-19 induced contractions seen earlier in the year, with the PMI results for October highlighting historically sharp monthly rates of expansion," Lima said in a statement.
The IHS Markit index is compiled from responses in the second half of the month from around 400 manufacturers, which indicates the direction of change compared with the previous month.
IHS Markit said that growth was led by the intermediate goods category, but there were also robust expansions in the consumer and investment goods sub-sectors.
Manufacturers indicated that the ongoing relaxation of covid restrictions, better market conditions and improved demand helped them secure new work in October, IHS Markit said. New export orders, too, rose at a quicker pace, one that was the most pronounced in close to six years, said the company.
Greater production needs led to another monthly increase in input buying among Indian manufacturers.
Moreover, quantities of purchases rose at the quickest pace in just under nine years.
Inflationary pressures, meanwhile, remained subdued as seen by a modest increase in input costs and only a marginal increase in selling prices, the statement said.
The data conforms to a strong jump in e-way bills for October, indicating that more goods were shipped within and across states in the month.
Generation of e-way bills (electronic permits for goods movement) in October was 21% higher than what was generated in October 2019 and 11% higher than what was generated in September this year. This early indicator suggests increased economic activity in October, Mint reported on Monday.
Industrial output for August, too, had shown a trend of economic recovery. Factory output had contracted at a slower 8% in August compared to a 10.8% contraction July.
In September, exports had turned positive after six months of contraction.
Stronger signs of quick and sustainable economic recovery will be a big relief for the Narendra Modi administration.
Experts take comfort in the emerging signs of recovery, although they are cautious about how things may pan out. “The pickup in economy is quicker than expected, but its sustainability will hinge on how covid emerges after the festive season. The biggest worry is the pandemic," said Crisil Ltd chief economist D.K. Joshi.