PMI shows contraction in Indian manufacturing activity, first time since 2 years

Newsroom24x7 Desk

manufacturing industryNew Delhi : Nikkei’s Manufacturing Purchasing Managers’ Index, compiled by Markit, fell to a 28-month low of 49.1 in December from the earlier value of 50.3 as at November. Interpreted in analysis, it indicates that Indian manufacturing activity contracted in December for the first time in more than two years. The reasons outlined for the same stand at — softening domestic demand and adding pressure on the central bank to ease policy, as revealed by a business survey showed on Monday. The contraction supported another first timer, as it was also the first reading below the 50 threshold that separated growth from contraction since October 2013. But the survey also revealed that output prices continued to rise, driven by higher input costs.

Pollyanna De Lima, economist at Markit said — India’s manufacturing sector took a turn for the worse at the year-end, with already gloomy internal demand further hampered by floods in the south of the country,

Natural imbalance from the climatic front, namely – severe rainfall and flooding, caused widespread destruction in late November and early December, which resulted in constraining of output to its lowest since the global financial crisis. To substanciate the same with data — the output sub-index fell to 46.8 from 50.4 the previous month, its lowest since early 2009, as new orders fell for the first time in more than two years.

Effect of such weak growth is expected to rub off its impact in terms of a likelihood of hardening of expectations that the Reserve Bank of India would ease policy further by June, provided inflation could stay well under control. Inflation has remained within the January target range of 2-6 percent as specified by Reserve Bank of India, giving space for the central bank to shave 125 basis points from rates in 2015. After four steps of ladder, the benchmark rate currently sits at 6.75 percent.

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