India’s manufacturing Purchasing Managers Index (PMI) improved to 47.2 in June from 30.8 in May and 27.4 in April, according to a report by IHS Markit. The rise in the index overshadows the stress faced by the Indian manufacturing sector amid the extension of COVID-19 lockdowns in major industrial regions. 

 

Outlook

Manufacturers remain optimistic towards the 12-month business outlook and positive sentiments are at a four-month high, said the report. Despite this, alongside the growing fear of an extended economic slowdown due to the pandemic, the degree of optimism was much weaker than the historical average.

 

Challenges

Indian manufacturers were challenged by deterioration in business conditions in June. The downturn in economic activity was primarily led by sharp de-growth in output and new orders as State governments imposed lockdown extensions weakening demand, said the report. 

 

In the June quarter, output declined sharply as production capacity was constrained by the pandemic and sales declined for the fourth month in June. Reduced output required manufacturers to cut purchases, even as input prices continued to fall for the fourth consecutive month. Amid a reduction in input costs, manufacturers resorted to lowering the price of their products to stimulate sales. 

 

The headline PMI figure is a weighted average of the five indices namely, new orders (30pc), output (25pc), employment (20pc), suppliers’ delivery times (15pc) and stocks of purchases (10pc).

 

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