India’s manufacturing activity expanded for the third consecutive month in March 2016 to hit an eight–month high due to a rise in new orders from both domestic as well as overseas clients.
According to the Nikkei purchasing managers index survey, India’s manufacturing upturn gathered momentum in March, with stronger inflows of new work leading firms to scale up output. Along with improved domestic demand, producers also recorded an increase in new export business. The Nikkei PMI Index rose to 52.4 in March from 51.1 in February. A reading above 50 indicates expansion while a reading below suggests contraction in factory activity. “PMI data suggest we should expect another quarter of robust economic growth in the last quarter of the 2015-16 financial year. The manufacturing PMI ticked higher in March, providing welcome reassurance that the sector has moved farther away from the flood-related contraction seen in December. Despite gathering momentum, growth of production and new orders still remained below trend rates. On the export front, it was encouraging to see a sustained increase in new export orders, often attributed to the depreciation of the rupee,” Pollyanna De Lima, an economist at Markit, who compiled the survey said in a note.
The survey further said the latest expansion was widespread across the three monitored sub-sectors, with consumer goods posting the quickest rate of increase. Buying levels increased further in March, which survey participants linked to stock-building initiatives. As a consequence of rising purchasing activity, pre-production inventories expanded. The rate of accumulation was slight overall and in line with those seen throughout the current four-month sequence of growth.
On the other hand, holdings of finished goods declined in March, and to the greatest extent since last August. According to panelists, both existing and new orders were often fulfilled directly from stocks. However, the survey also pointed out that input costs rose amid reports of the weaker rupee resulting in higher prices paid for imported raw materials.
