India November factory growth hits 10-month high on strong demand
- In Reports
- 04:52 PM, Dec 01, 2021
- Myind Staff
A private survey showed on Wednesday that manufacturing activity in India increased at the fastest pace in 10 months in November, buoyed by the positive impact of rising demand, but factories are worried about future prospects due to higher inflationary pressure.
As a result of easing COVID-19 restrictions, demand and sales increased, indicating the economy was on track for normalization.
Based on IHS Markit data, the Purchasing Managers' Index climbed to 57.6 in November from 55.9 in October. During this period, the index was higher than it has been since January and passed the 50-point that separates growth from contraction for the fifth consecutive month.
"The Indian manufacturing industry continued to expand in November, with growth gathering pace and forward-looking indices generally pointing to further improvements in the months to come," said Pollyanna De Lima, economics associate director at IHS Markit.
"The fact that firms purchased additional inputs at a stronger rate amid efforts to restock, combined with recurring declines in inventories of finished goods and tentative signs of a pick-up in hiring activity, indicate that production volumes will likely expand further in the near-term."
The increase in new orders was mostly driven by domestic demand, while it was the best since February. It resulted in the production level rising for a fifth month in a row and at the most rapid pace in nine months.
To meet the heightened demand, the number of employees in firms increased, ending a three-month sequence of reductions. However, the pace of job creation remained low. The rising input prices weakened some of the optimism. With the exception of October, the sub-index for input prices reached its highest levels in almost eight years due to supply constraints and higher transportation costs.
"Should raw material scarcity and shipping issues continue to feed through to purchasing prices, substantial increases in output charges could be seen and demand resilience would be tested," De Lima said.
The price of output increased moderately indicating firms passed some of the burden of increasing costs to clients.
As per a recent news source, the Reserve Bank of India is not expected to raise interest rates until at least the beginning of next financial year, but it might consider raising rates earlier to combat inflation. As the country's low vaccination rates persist, disruptions from a new variant of the Omicron coronavirus could slow the growth of the economy in the July-September quarter, economists said.
Image source: cnbctv18
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