Manufacturing sector grew at its slowest pace in 25 months in November on sluggish pace of new business orders, a monthly survey showed today, strengthening the case for the RBI to keep the interest rates low.
This also marks the fourth consecutive month of decline in the rate of Indian manufacturing output growth, as per the monthly Purchasing Managers' Index (PMI) survey conducted by Markit and Nikkei India.
"The health of India's manufacturing economy improved for the 25th successive month in November, although to the least extent in this sequence.
"The latest PMI data showed slower increases in incoming new business and output, while subdued demand growth led firms to keep workforce numbers broadly unchanged," as per the survey.
The input cost inflation at the same time accelerated to the strongest since May, whereas factory gate prices were raised at a weaker rate that was marginal overall.
PMI fell to a 25-month low of 50.3 in November, from 50.7 in October. A reading above 50 marks expansion of the sector, while a score below this level means contraction.
Among sub-sectors, consumer goods was the best performing category, while operating conditions at intermediate goods companies deteriorated for the first time since December 2013.
Pollyanna De Lima, economist at Markit, said the November
PMI data points to tepid manufacturing growth across India, with gloomy domestic demand resulting in the weakest expansion in production for 25 months.
Signs of the sector slowing have been building up, as growth of both new orders and output has eased in each of the past four months, Lima noted.
"The slowdown in growth combined with weak inflationary pressures support further rate cuts. Input cost and output charge inflation as measured by the survey were much lower than their respective long-run averages," Lima said.
The survey comes a day after official data showed that Indian economy expanded 7.4 per cent in July-September mainly on the back of pick up in manufacturing activities.
Meanwhile, Reserve Bank of India (RBI) today kept the policy rates unchanged at 6.75 per cent.
As per the survey, there were reports that growth of new work was hampered by subdued domestic demand and competitive pressures.
"Mirroring the trend for new orders, production increased at the softest pace in the current 25-month sequence of expansion," it added.
Indian manufacturers indicated that new business inflows rose in November, which marked a 25-month sequence of expansion.
However, rate of growth was the weakest over this period.
"New business from abroad increased further in November. Although only slight, the rate of growth was the strongest in three months. New export orders rose at consumer and intermediate goods firms, while a contraction was seen in the capital goods category," it said.
Last month, employment in the manufacturing sector was broadly unchanged while outstanding business held by Indian goods producers rose during the same period, amid evidence of delayed payments from clients and labour shortages.
In November, inventory levels declined while stocks of purchases declined for the first time in one-and-a-half years.
"Input cost inflation accelerated to the strongest in six months during November, but remained below the long-run series average. Companies reported higher prices paid for metals, textiles and food," the survey said.
