Indian factory output rose for the 17th consecutive month on the back of a rise in new orders in the economy. Purchasing Managers Index (PMI) rose to 52.1 in March, up from 51.2 last month, highlighting a further improvement in the health of the manufacturing economy.
PMI, compiled monthly by global bank HSBC, measures economic health of a sector based on surveys of private sector companies. A reading of above 50 on the index denotes expansion.
The momentum in the manufacturing activity was broad based with growth in consumer, intermediate and investment goods companies. New orders registered the quickest rise despite rising inflationary pressures as demand conditions improved in the economy. The report mentioned that output charge inflation quickened to the strongest in four months, as firms attempted to sustain profit margins by raising their tariffs.
“Momentum is building in manufacturing as the sector begins to build up a head of steam. Stronger expansions of output, new orders and stocks of purchases contributed to a higher PMI reading in March," said Pollyanna De Lima, economist at Markit.
"To add to the good news, all three monitored market groups delivered faster growth, with consumer goods production continuing to lead the way," she said.
Indian economy has seen inflation stabilising and growth picking up but manufacturing hasn't really picked up as expected. Latest report on the index of eight core industries showed growth declining in February to the lowest in 16 months. The results of the PMI survey are in tandem with the results of the CII survey released this week, which show that business confidence has improved in the economy.
Despite the rise in manufacturing, the biggest challenge the sector faces is employment while manufacturing employment stabilised in March, having fallen in February. Staffing levels have barely changed over the past 14 months, the report mentioned.
The fate of manufacturing would depend on the government's ability to deliver on its reforms agenda. While they have been successful in implementing some reforms they haven't been able to deliver on the Land Acquisition Bill which is still a bone of contention for Mod-led government.
(Edited by Joby Puthuparampil Johnson)