India’s manufacturing output expands at weaker pace in March; employment decreases first time in 8 months

India’s manufacturing conditions improved for the eighth consecutive in March, but at the weakest pace since October. This reflected softer expansions in new work and output and a decline in employment for the first time in eight months. On a positive note, the recent build-up of inflationary pressures eased in March, with softer increases in both input costs and output prices recorded.

The Nikkei India Manufacturing Purchasing Managers’ Index (PMI) fell from 52.1 in February to a five-month low of 51.0 in March. This indicated the slowest improvement in operating conditions recorded by the survey since last October.

Indian goods manufacturers raised their output for the eighth successive month during March. Higher production was mainly linked to new order growth and favorable demand conditions. However, the degree to which output rose was modest and the weakest since October. Growth was reported across all three broad market groups, led by consumption goods.

March saw a further increase in input costs. Although marked overall, inflation moderated from February’s recent peak and registered below the series trend. Respondents commented on greater demand for raw materials, with prices for chemicals and steel reportedly up since February.

Indian manufacturers raised their output charges in March, thereby extending the period of inflation to eight months. Survey respondents attributed a rise in selling prices to the pass-through of higher cost burdens to clients. However, partly reflecting slower cost increases, output charge inflation was marginal and the weakest in the current sequence.

"Lastly, business sentiment remained weak in the context of historical data reflecting some concerns regarding business prospects over the next 12 months. Indeed, amid a slower expected pace of recovery in consumer spending, IHS Markit marginally downgraded its real GDP forecast to 7.3 percent for the fiscal year 2017-18," said Aashna Dodhia, Economist at IHS Markit and author of the report.

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