India Inc grows for third month

New Delhi: Led by increase in new orders, India’s manufacturing grew the fastest in five months in March according to the Nikkei India Manufacturing Purchasing Managers’ Index released on Monday.

This is the third straight month when manufacturing has seen an expansion. The survey indicates that any negative impact of demonetisation has faded away.

What will be heartening for the government, the survey said that firms hired additional employees to cope with greater workloads.

The Nikkei Manufacturing Purchasing Managers’ Index, compiled by IHS Markit, rose to 52.5 in March, from 50.7 in February.  Any figure above 50 means expansion and below it indicates contraction.

“Incoming new orders expanded at a stronger pace, thereby leading to quicker increases in production and input purchasing,” said the survey. It said this resulted in an overall increase in stocks of purchases.

“Having fallen in each of the previous three months, pre-production inventories rose modestly in March. Conversely, holdings of finished items dipped sharply due to production volumes failing to match requirements for existing projects,” it said.

The survey said production expanded at the strongest rate since last October as firms sought to fulfil new and existing projects. “The increase in total new work was supported by higher new export orders, which grew at a solid and accelerated pace,” it said.

The survey found that business confidence among manufacturers improved in March, with almost one-fifth of panellists expecting output levels at their units to be higher in 12 months’ time.

Forecasts of a pick-up in demand and the launch of new product lines were the main factors underpinning optimism, it said.

“Reversing the decline noted in February, manufacturing jobs rose in March as some firms took on extra staff in line with efforts to expand capacity,” said the survey.  

“Looking ahead, production volumes are likely to rise further as businesses will seek to replenish their stocks. Indeed, we saw a marked drop in inventories of finished items, alongside a stronger degree of confidence towards the year-ahead outlook for output,” said Pollyanna De Lima, Economist at IHS Markit.

Meanwhile, the RBI MPC, which is scheduled to meet this week, in its policy review meet on February 8 kept the key interest rate unchanged at 6.25 per cent and said it is awaiting for more clarity on the inflation trend and impact of demonetisation on growth.