The country’s manufacturing sector activity declined to its 15-month low in August owing to slower increases in sales, output and employment, a monthly survey said on Monday.
The dip in August follows the economic growth rate slipping to a six-year low of 5 per cent in the three months ended June as consumer demand and private investment slowed amid a deteriorating global environment.
The IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) fell to 51.4 in August, its lowest since May 2018, from 52.5 in July, as most survey indicators fell since July to signal a widespread loss of momentum.
This is the 25th consecutive month that the manufacturing PMI has remained above the 50-point mark. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.
“August saw an undesirable combination of slowing economic growth and greater cost inflationary pressures in the Indian manufacturing industry,” Pollyanna de Lima, principal economist at IHS Markit, said, adding that “most PMI indices moved lower, including key health-check measures for new orders, output and employment”.
India’s economic growth has slumped for the fifth straight quarter to an over six-year low of 5 per cent in the three months ended June as consumer demand and private investment slowed amid deteriorating global environment.
In August, sales expanded at the slowest rate in 15 months, following which production growth and job creation were tamed. Moreover, factories lowered input buying for the first time since May 2018.
“Another worrying sign was the first drop in input buying in 15 months, which reflected a mixture of intentional reductions in stocks and shortages of available finance,” Lima said.
The survey noted that competitive pressures and challenging market conditions restricted the upturn.
New orders from overseas also increased at a slower rate in August, with growth the weakest since April 2018.
“Until manufacturers are willing to loosen the purse strings, it is difficult to foresee a meaningful rebound in production growth on the horizon,” Lima said.
Subdued sales to domestic and international clients curbed output growth, which softened to the weakest in a year. Some survey members also reported cash flow problems and lack of finance.
July core growth dips
Growth of eight core industries dropped to 2.1 per cent in July, mainly because of a contraction in coal, crude and natural gas production, according to government data released on Monday.
The eight core sector industries — coal, crude, natural gas, refinery products, fertiliser, steel, cement and electricity — had expanded 7.3 per cent in July last year.
Output of coal, crude, natural gas and refinery products recorded negative growth during the month under review. PTI
Similarly, growth rate in production of steel, cement and electricity declined to 6.6 per cent, 7.9 per cent and 4.2 per cent, respectively, against 6.9 per cent, 11.2 per cent and 6.7 per cent.
However, fertiliser output marginally grew 1.5 per cent in July against 1.3 per cent in July 2018.
For April-July period, the growth rate in the eight sectors almost halved to 3 per cent compared with 5.9 per cent a year ago.
The growth rate of these eight sectors are declining since April this year. It slowed down to 5.2 per cent in April from 5.8 per cent. Then it came down to 4.3 per cent in May and 0.7 per cent in June.
The GDP data too has shown deceleration with the growth rate coming down to over six year low of 5 per cent in the first quarter of the current fiscal, mainly on account of sharp dip in manufacturing sector, which registered almost a flat growth of 0.6 per cent.
Dumping duty
The government has initiated a probe into an alleged dumping of clear float glass, used in automobiles and refrigeration industries, from Malaysia following a complaint from domestic players.
The investigation is being conducted by the commerce ministry's arm Directorate General of Trade Remedies.
In a notification, the directorate has said it has found sufficient evidence of dumping of the glass from Malaysia and its impact on the domestic industry. “The authority hereby initiates an investigation into the alleged dumping, and consequent injury to the domestic industry,” it said.