India’s Manufacturing Growth Moderates as November PMI Dips to 56.5
India's November PMI dips to 56.5, reflecting slower manufacturing growth amid rising costs and inflation, with key sectors showing signs of strain.
India’s Manufacturing PMI Slows to 56.5 in November: Rising Costs and Inflation Strain Growth Amid Economic Challenges
India’s manufacturing growth eased slightly in November, the Purchasing Managers’ Index returning to 56.5 from 57.5 the previous month. The latest report, compiled by S&P Global on behalf of HSBC, was identical with the September report – a low since February. That downturn suggests growing pressures on the industry even though the PMI remains far above its expansion threshold.
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In contrast, an earlier flash PMI by HSBC had pegged November PMI higher at 57.6 and it was later adjusted to 57.3; but, the final reading is much below expectations. “Though India’s manufacturing PMI at 56.5 presents continued growth spurred by international demand, this was the highest in new orders from abroad in the past four months, high cost of production is putting pressure on the sector.”
Input prices for intermediaries such as chemicals, cotton, leather, and rubber increased. Output prices surged to an eleven-year high as manufacturers are passing on a rise in input, labor, and transport costs to the consumers. These are the challenges that explain the slowdown of output growth.
Slow Q2 GDP Growth Indicates New Manufacturing Challenges
On its side, growth in the Indian economy appears to have also begun to lose steam with Q2 real GDP growth decelerating to a seven-quarter low of 5.4%. This is steeper than 6.7% that the preceding quarter had, and considerably less than the 8.1% growth that was witnessed over the same period last year. The entire growth was weighed down by mining and quarrying sectors, which have contracted over the quarter, and subdued manufacturing performance.
Manufacturing GVA growth remained the lowest since Q1 at 2.2%, much below what the same had recorded in Q2 the previous year at 14.3%.
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Mining and Quarrying contracted by 0.1% against Q1 growth at 7.2% and Q1 2023 at 11.1%.
It can be deduced from these statistics that the above industrial sectors of the nation are facing great adversity during this time due to climbing inflation and worldwide economic unease.
RBI to Look at Policy with Growth Dropping and Inflation Steeply Rising
The Reserve Bank of India Monetary Policy Committee will meet from December 4 to 6, discussing its view on the economy along with reviewing interest rates. Though the repo rate, which has been steady since February 2023, at 6.5%, may be left unchanged, consensus suggests that the RBI may shave off its growth and inflation estimate. The latest poll has already forecasted that the RBI might cut the growth estimate to 7.2% as it revises upwards its inflation forecast to 4.5%.
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So growth momentum is balanced with inflationary pressures as it deals with the strains in manufacturing and industrial activities while India still hews through these economic headwinds.
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