February 2023 sees Manufacturing PMI slide to 55.3

India’s manufacturing sector witnessed almost no change in the month of February, with the manufacturing PMI recorded at 55.3, as compared to 55.4 in January, according to the S&P Global PMI data. The sector continued to report robust growth of output and new orders halfway through the final fiscal quarter, but there was a slowdown in the growth rate of international sales expansion. Although companies continued to scale up input prices, job numbers expanded only fractionally. The headline figure was still above its long-run average of 53.7, signaling a strong improvement in the health of the sector.

The PMI results suggest that most of the upturn in new orders by firms was domestically driven, as international sales were weakest in almost a year, said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence. Although input costs in the manufacturing industry increased further, with higher prices for electronic components, energy, foodstuff, metals, and textiles, the latest rise was among the weakest in around two years. The survey showed that some firms were reluctant to pass on cost increases to clients, with output charge inflation easing since January.

Growth momentum in India’s manufacturing industry was maintained in February, with new orders and output increasing at similar rates to January. Companies were confident in the resiliency of demand and continued to add to their inventories by purchasing additional inputs. Job creation failed to gain meaningful traction, however, as firms reportedly had sufficient staff to cope with current requirements. The latest data showed only a marginal increase in their backlogs. Suppliers also appeared to have ample capacity to accommodate rising input demand, shown by a stabilization in delivery times.

According to S&P, the 20th consecutive rise in manufacturing production was reported in February. Input cost inflation was at a four-month high but below its long-run average and among the weakest in over two years. Some firms passed on cost increases to clients, but the vast majority of 94% left their fees unchanged as they tried to boost sales. Buying levels rose sharply, the report stated.

The Indian manufacturing sector has been facing some challenges amid the ongoing pandemic, such as supply chain disruptions, labor shortages, and rising input prices. However, the sector has shown resilience and adaptability in the face of these challenges, as reflected in the sustained growth of output and new orders.

The manufacturing sector is a crucial contributor to India’s GDP and employment, and the government has been taking several steps to promote the sector’s growth, including incentives for domestic manufacturing, reforms in labor laws, and measures to improve the ease of doing business. The sustained growth of the manufacturing sector is also expected to have a positive impact on other sectors of the economy, such as services and agriculture.

However, the sector still faces some challenges, such as the need to improve infrastructure, logistics, and access to credit. The government and industry players need to work together to address these challenges and create a conducive environment for the manufacturing sector’s growth.

The manufacturing sector in India showed no significant change in February, with sustained growth in output and new orders. The results suggest that most of the upturn in new orders was domestically driven, with international sales being the weakest in almost a year. Although input costs increased, job numbers expanded only fractionally. The sustained growth of the manufacturing sector is critical for India’s economic growth, and the government and industry players need to address the sector’s challenges to create a conducive environment for its growth.