India’s manufacturing PMI marginally expanded to 56.4 in December from a reading of 56.3 in November comfortably crossing the critical 50 threshold for the fifth month. Manufacturers ramped up production with increased buying to restock inventories amid strong factory orders.
A shortage of raw material with suppliers led to delays and higher input costs, which rose at a rapid pace over the past two years. Robust new orders decreased finished goods inventories in December. The IHS Markit Manufacturing Purchasing Managers’ Index (PMI) for India reflects a marked improvement in business sentiments across sectors amid the expansion of both sales and production in the month.
Exports increased in December, but the pace of increase in new export orders was slowest in the successive four-month period.
The combined performance of India’s manufacturing sector in the past three months (Q3 FY2021) indicates a significant improvement from Q2. The three-month PMI average increased to 57.2 from 51.6.
In December, input cost inflation rose to a 26-month high with an increase in prices of metals, plastics, chemicals and textiles. Manufacturers hiked output charges to pass on the cost burden, but the rate of inflation remains marginal. Most producers are upbeat about maintaining higher output in 2021, while some expressed concerned about the long-term impact of COVID-19 pandemic, weakening the degree of optimism among businesses to a four-month low.