India’s manufacturing activity expanded at its fastest pace in more than eight years in September, as a relaxation in coronavirus lockdown restrictions fueled a surge in demand and production, a private survey showed Thursday, though layoffs continued.
Signs of recovery are good news for Asia’s third-largest economy, which is expected to mark its first full-year contraction since 1979 this year. The pandemic is spreading in India at the fastest rate in the world.
The Nikkei Manufacturing Purchasing Managers’ Index, compiled by IHS Markit, jumped to 56.8 in September from 52.0 in August, above the 50 level that separates growth from contraction for the second month in a row. It was the highest reading since January 2012.
“The Indian manufacturing industry continued to move in the right direction, with September PMI data highlighting many positives. Due to relaxed COVID-19 restrictions, factories went full steam ahead in production, supported by an increase in new jobs, “said Pollyanna De Lima, associate director of economics at IHS Markit.
“While uncertainty remains about the COVID-19 pandemic, producers can at least for now enjoy the recovery.”
Tracking production for a sub-index reached its highest level since December 2007 and new orders expanded at the fastest pace since February 2012, helped by both domestic and foreign demand, which grew for the first time in seven months.
Although input prices rose at a slower pace in September, manufacturers raised their selling prices after cutting them since March to secure sales.
Despite the significant rebound, companies cut staff for the sixth month in a row. Coronavirus-related distortions have already put millions out of work.
The sector is unlikely to receive much support from the Reserve Bank of India in the coming months as persistently high inflation is expected to force the RBI to stay on the sidelines.
The RBI earlier this week postponed a policy committee meeting that was scheduled for September 29 to October 29. 1 and said it would be reprogrammed. He did not give a reason for the move.
Still, business optimism about the next 12 months reached its highest level since August 2016.
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