India’s manufacturing sector activities moderated in August as business orders and production rose at softer rates because of the pandemic and rising input costs, a monthly survey said on Wednesday.

The seasonally adjusted IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) stood at 52.3 in August, down from 55.3 in July, indicating a softer rate of growth that was subdued and below its long-run average.

The government is crowing about the 49.6 per cent growth in manufacturing in the first quarter of this year but that is over a post-Covid recession-racked low base. The manufacturing sector is underperforming the pre-Covid normal — the first quarter of 2019-20 — by 4.18 per cent.

Darren Aw, Asia economist, Capital Economics, said “The drop in manufacturing PMI in August is just a sign of activity normalising following the strong pace of recovery in recent months. But the threat of further virus waves remains a significant downside risk to the outlook.”

He said the manufacturing sector was not too badly hit during the Delta outbreak. “Based on the national accounts data for Q1 released on Tuesday, we estimate that manufacturing output contracted by just 0.5 per cent quarter-on-quarter in seasonally-adjusted terms, much smaller than the 30 per cent quarter-on-quarter collapse during the national lockdown last year.

Stating that the bigger worry is the threat of further virus outbreaks, Aw said “the experience in Kerala illustrates how quickly the virus situation can change… recorded infections have jumped sharply again as testing has been ramped up once more. Even if the outbreak in Kerala soon comes under control, the experience there underlines the risk of future virus waves occurring elsewhere”.

“August saw a continuation of the manufacturing sector recovery, but growth lost momentum as demand showed some signs of weakness due to the pandemic,” Pollyanna De Lima, economics associate director at IHS Markit, said.