Factory growth at 3-month high

Supported by a stronger increase in new business orders, the activity in India’s manufacturing sector rose to a three-month high in June, as revealed by the widely tracked Nikkei Purcha-sing Managers' Index (PMI) on Friday.

The main contributing factors to the upward movement in the PMI were stronger rates of growth in new orders and output, both of which reached three-month highs in June. The seasonally adjusted Nikkei India Manufacturing PMI rose to 51.7 in June from 50.7 recorded in May.

A reading above 50 indicates growth while a reading below 50 signals contraction in activities.

While favourable operating environment enco-uraged businesses to pu-rchase additional inputs, it was not adequate to generate fresh jobs as existing staff levels were sufficient enough to handle new and existing orders.

“The domestic market continues to be the main growth driver, as the Indian economic upturn provides a steady stream of new business. Nonetheless, there were also signs of an improvement in overseas markets, as new foreign orders rose in June following a decline in May. However, it looks as if lacklustre global demand remains a headwind for Indian manufacturers. However, the sustained growth of output and order books failed to encourage producers to raise employment. It has been roughly three years since the sector has seen any meaningful job creation,” said Pollyanna De Lima, eco-nomist at Markit, who compiled the survey.

Offsetting the decline seen in May, the new export orders increased in June. However, the rate of expansion was only slight and below the long-run series average. Two of the three monitored market groups recorded higher levels of new business from abro-ad, the exception being intermediate goods.

However, it noted that the incoming new work rose across the three broad areas of the manufacturing economy, as did production. The best-performing category was consumer goods.

The input costs rose for the ninth-month running in June with the participants res-ponding on higher prices paid for metals, chemicals, plastics, textiles, petrol, food and paper.