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India's Manufacturing Activities Moderate In March As Production, Sales Slow Down

The seasonally-adjusted S&P Global India Manufacturing Purchasing Managers' Index (PMI) was at 54.0 in March, down from 54.9 in February

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India's manufacturing sector activities moderated in March with companies reporting softer expansions in new orders and production as inflation concerns dampened business confidence, a monthly survey said on Monday.

The seasonally-adjusted S&P Global India Manufacturing Purchasing Managers' Index (PMI) was at 54.0 in March, down from 54.9 in February, highlighting weakest rate of growth in terms of production and sales since September 2021.

The March PMI data pointed to an improvement in overall operating conditions for the ninth straight month. In PMI parlance, a print above 50 means expansion while a score below 50 denotes contraction.

"Manufacturing sector growth in India weakened at the end of fiscal year 2021/22, with companies reporting softer expansions in new orders and production," Pollyanna De Lima, Economics Associate Director at S&P Global, said.

On the price front, manufacturers reported another increase in input prices at the end of fiscal year 2021/22. Chemical, energy, fabric, foodstuff and metal costs were all reportedly greater than in February.

"Goods producers signalled higher prices paid for chemicals, energy, fabric, foodstuff and metals, despite supplier performance worsening to the least extent in almost a year," Lima said.

Output prices rose in March as goods producers sought to share part of the additional cost burden with their clients.

"For now, demand has been sufficiently strong to withstand price hikes, but should inflation continue to gather pace we may see a more significant slowdown, if not an outright contraction in sales," Lima said.

According to Lima, companies appeared very concerned about price pressures, which was a key factor dragging down business confidence to a two-year low.

The March data pointed to subdued optimism towards growth prospects among Indian manufacturers, with the overall level of sentiment slipping to a two-year low. "Anecdotal evidence indicated that inflation concerns and economic uncertainty dampened overall confidence," the survey said.

Meanwhile, there was a renewed decline in new export orders received by Indian goods producers, ending an eight-month sequence of growth.

On the employment front, there was a broad stabilisation in headcounts across the manufacturing industry, following three successive months of job shedding. Companies indicated that payroll numbers were sufficient to cope with current requirements.

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