India’s manufacturing growth just hit an 8-month low

• The cautious sentiment of Indian businesses drove the growth rate of the country’s manufacturing sector activity to its lowest point since August 2018.
  
• India’s score on the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) fell to 51.8 points in April 2019, a decline from 52.6 from the previous month.
  
• The report, which was compiled by IHS Markit, indicated that the surrounding uncertainty around general elections was to blame for a sluggish increase in new orders, which affected manufacturing sector activity.
  

The cautious sentiment of Indian businesses drove the growth rate of the country’s manufacturing sector activity to its lowest point since August 2018.

India’s score on the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) fell to 51.8 points in April 2019, a decline from 52.6 from the previous month.

While a score above 50 indicates an expansion in manufacturing output, this is the lowest score in eight months. India’s manufacturing activity had been expanding for the past 21 months.

The report, which was compiled by IHS Markit, indicated that the surrounding uncertainty around general elections was to blame for a sluggish increase in new orders, which affected manufacturing sector activity.

In general, Indian businesses are opting for a wait-and-watch approach in anticipation of a Modi victory, which portends policy continuity.

As a result, hiring in the manufacturing sector also fell to a 13-month low.

That was also exacerbated by a slowing rate of input cost inflation, which led to pricing pressures on the behalf of factories, and a liquidity crunch.

Exports, however, proved to be a bright spot - recording a higher growth rate on a month-to-month basis.

Once elections conclude, manufacturers are expected to loosen their purse strings and invest in capacity expansion and advertising.

Commenting on the results, Pollyanna De Lima, Principal Economist at IHS Markit, said that the RBI might cut rates again in June to boost economic activity. “With price pressures in the manufacturing economy cooling and growth losing momentum, it’s increasingly likely that the RBI may cut its official rate for a third successive time in June.”


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