India's Factory Activity Improves In September On Easing Covid Restriction: PMI survey

India's manufacturing activity rebounded last month as the economy recovered from the pandemic-induced slowdown, boosting demand and output, although enterprises cut headcount at the fastest rate since May, according to a study.

Supported by ultra-easy monetary policy and increased fiscal investment, the recovery could last at least a few months.

IHS Markit's Manufacturing Purchasing Managers' Index increased to 53.7 in September from 52.3 in August, remaining over the 50-point separating growth and contraction for the third month in a row.

A raise in the Reserve Bank of India's benchmark interest rate appears unlikely until at least next fiscal year, and India's government announced earlier this week that it would keep borrowing-backed expenditure in place to boost the economy.

The seasonally adjusted index increased from 52.3 in August to 53.7 in September, indicating a higher improvement in overall business conditions across the sector. The PMI averaged 53.8 in the second quarter of fiscal year 2021/22, a significant improvement from 51.5 in the first quarter.

International demand for Indian goods grew in September, despite reports from certain companies that the pandemic had hampered international sales. New export orders increased at a higher rate in September than in August, while the increase was still small, the report said.

Another element that contributed to the increase in input purchases was the widespread belief that production will rise in the coming year.
As pandemic-related limitations ease, companies expect sales to climb even more.
September employment figures revealed little change in the manufacturing sector, as many businesses reported following government requirements regarding shift work.

Since then, retail inflation has been on the decline, having risen dramatically to 6.3 percent in May from 4.23 percent in April. This year, it was 6.26 percent in June and 5.59 percent in July.

"Aggregate manufacturing production in India rose for the third straight month in September, and at a faster pace than that recorded in August. Where growth was reported, panel members cited favourable market conditions and improved sales volumes," the report noted.

Commenting on the latest survey results, Pollyanna De Lima, Economics Associate Director at IHS Markit, said: "Indian manufacturers lifted production to a greater extent in September as they geared up for improvements in demand and the replenishment of stocks. There was a substantial pick-up in intakes of new work, with some contribution from international markets. "Companies continued to purchase extra inputs in September, but jobs were little changed over the month. In some instances, survey participants indicated that government guidelines surrounding shift work prevented hiring.