Indian manufacturing industry starts 2021 with strong growth: IHS Markit

New Delhi [India], February 1 : The Indian manufacturing industry enjoyed a strong start to 2021 with companies scaling up production at the quickest pace in three months, according to the latest IHS Markit Manufacturing Purchasing Managers' Index (PMI) released on Monday.
Firms were successful in their stock-building initiatives with a sharper upturn in quantity of purchases underpinning the strongest rise in input inventories in over a decade.
While employment fell further, job shedding moderated. Price pressures meanwhile intensified, driven by capacity constraints in supply chains.
The seasonally adjusted IHS Markit India Manufacturing Purchasing Managers' Index (PMI) rose from 56.4 in December to 57.7 in January to signal the strongest improvement in the health of the sector in three months.
Sustained sales growth supported a further upturn in manufacturing sector output in January. The rise in production was the sixth in successive months and the quickest since last October.
Firms noted a faster expansion in new business inflows at the start of the year, the quickest in three months. Anecdotal evidence pointed to higher sales to new and existing clients as well as the securing of bulk orders.
New orders and output rose across each of the three broad areas of the manufacturing sector. For both measures, rates of expansion picked up at consumer and capital goods firms but eased at intermediate goods makers.
Aggregate new export orders continued to increase in January, taking the current stretch of growth to five months. Moreover, the pace of expansion was solid and quickened from December.
Despite the pick-up in demand, manufacturing sector jobs decreased further in January. The pace of contraction was modest, however, and the slowest in the current ten-month sequence of reduction.
Companies that refrained from hiring mentioned the observance of government norms to keep workers to a minimum.
"An important insight from the January survey was a pick-up in inflationary pressures as lingering supply-side squeeze drove the sharpest increase in purchasing costs for over two years," said Pollyanna De Lima, Economics Associate Director at IHS Markit.
"The favourable demand environment was accommodative of price hikes and charges were raised at the fastest pace in over a year," she said.
"Companies cheered the roll-out of Covid-19 vaccines and became more optimistic towards growth prospects, a position that is supportive of investment and job creation as businesses attempt to rebuild their inventories of finished goods and meet demand needs," said De Lima.
The IHS Markit India Manufacturing PMI is compiled from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. The panel is stratified by detailed sector and company workforce size based on contributions to GDP.
IHS Markit is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government.