India's factory activity improves in Sept; Manufacturing PMI rises to 53.7

The seasonally adjusted IHS Markit India Manufacturing Purchasing Managers' Index (PMI) rose to 53.7 in September from 52.3 in August, highlighting a stronger expansion in overall business conditions across the sector.

The factory activity rose on account of production growth boosted by stronger new order inflows, companies scaling up input buying and acceleration in input cost inflation.

For the second quarter of fiscal year 2021/22, the PMI averaged 53.8, a sizeable improvement from 51.5 in the opening quarter, according to a media statement.

Also Read: Manufacturing growth moderates in Aug on COVID-19 curbs, surging input costs: PMI

A reading above 50 indicates economic expansion and below the threshold points to contraction.

The gauge of activity across the country's manufacturing sector dipped to 52.3 in August from 55.3 in July on account of the COVID-19 pandemic and rising input costs, indicating a softer rate of growth that was subdued and below its long-run average.

Consumer goods was the brightest spot in September, posting the highest PMI reading of the three monitored market groups amid substantial accelerations in growth of new orders and output.

"Aggregate manufacturing production in India rose for the third straight month in September, and at a faster pace than that recorded in August. Where growth was reported, panel members cited favourable market conditions and improved sales volumes," the report noted.

International demand for Indian goods also strengthened in September, although there were mentions among some firms that the pandemic restricted international sales. New export orders expanded at a faster rate than in August, though one that was modest overall, it added.

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Another factor that supported the uptick in input buying was a common view that production would increase in the year ahead. Companies forecast further growth of sales as pandemic-related restrictions continue to ease.

"Indian manufacturers lifted production to a greater extent in September as they geared up for improvements in demand and the replenishment of stocks. There was a substantial pick-up in intakes of new work, with some contribution from international markets," Pollyanna De Lima, Economics Associate Director at IHS Markit and author of the report, said.

"Companies continued to purchase extra inputs in September, but jobs were little changed over the month. In some instances, survey participants indicated that government guidelines surrounding shift work prevented hiring," she added.

After subsiding in each of the previous two months, cost inflationary pressures intensified in September. Strong demand for scarce products contributed to the increase in input costs, as did rising fuel and transportation rates, Lima further stated.