India’s manufacturing activity picks up in April as input cost inflation hits five-month high, survey shows

Amid high inflation, manufacturing activity in India improved in April on the back of quicker increases in production, factory orders and international sales, according to a seasonally adjusted monthly survey published Monday. The Manufacturing Purchasing Managers Index (PMI) rose to 54.7 points in April, up from 54 points in March, helped by easing of pandemic-led restrictions. Manufacturing PMI also beat analyst expectations which was at 53.8, according to a Reuters survey. This growth is expected to sustain in the near term, however the commodity price hikes amid ongoing Ukraine crisis and supply chain crunch could dampen the demand.

The Indian manufacturing industry started the new fiscal year 2023 by posting a “marked and accelerated expansion in new orders and production,” the survey conducted by S&P Global said. International demand also jumped robustly to a 9-month high after contracting in March while the domestic demand was above average, it added. However, this was coupled with input prices increasing at the fastest pace in five months, and output charge inflation hit a 12-month high. Companies passed on the price rise to customers, but the demand for their goods could be hurt in future.

 “A major insight from the latest results was an intensification of inflationary pressures, as energy price volatility, global shortages of inputs and the war in Ukraine pushed up purchasing costs. Companies responded to this by hiking their fees to the greatest extent in one year. This escalation of price pressures could dampen demand as firms continue to share additional cost burdens with their clients,” Pollyanna De Lima, Economics Associate Director at S&P Global, said in the statement.

Source: S&P Global India Manufacturing PMI

“There was some improvement in business confidence at the start of fiscal year 2022/23. However, the overall degree of optimism remained subdued by historical standards. Some firms foresee further improvements in demand and economic conditions, while others noted that the year-ahead outlook was difficult to predict,” according to the S&P Global India Manufacturing PMI.

The S&P Global India Manufacturing PMI is a monthly survey based on the performance of 500 manufacturing companies in the country, with an aim to understand how the manufacturing sector is performing. When readings are below 50, they indicate contraction while readings above 50 indicate expansion. The survey measures metrics such as new orders, output and employment.