The rollout of goods and services tax (GST) has affected the Indian manufacturing sector badly, according to a report. The Nikkei India Manufacturing Purchasing Managers’ Index (PMI) reading stood at 50.3 in October, down from 51.2 in September. The reduction indicated a broad stagnation in the health of the manufacturing sector during October.
The PMI is based on monthly surveys of carefully selected companies representing major and developing economies worldwide. The Nikkei India Manufacturing PMI is the report based on data compiled from over 400 industrial companies.
"Growth in India’s manufacturing sector lost momentum in October. Output rose only fractionally and new orders stagnated over the month. In response to subdued demand conditions, both purchasing activity and pre-production inventories decreased," said the survey.
"India’s manufacturing companies struggled somewhat as the recent recovery enjoyed by the sector lost impetus in October. Disappointingly, manufacturing production rose at the weakest pace in the current sequence of growth. Inflows of new orders stagnated as the negative effects arising from the implementation of GST continued to dampen demand levels. Furthermore, overseas demand for Indian goods dipped to the greatest extent since September 2013," said Aashna Dodhia, economist at IHS Markit and author of the report.
On the price front, manufacturing companies continued to face higher input costs, which rose at the fastest pace since May. Firms raised their output charges to pass on higher cost burdens to clients. That said, their ability to fully pass on higher input costs was restricted due to competitive conditions. Reflecting subdued demand conditions, firms were discouraged from engaging in input buying. Purchasing activity fell for the first time in three months, albeit marginally. Meanwhile, pre-production stocks reduced in October.
“On the bright side, the labour market continued to improve, with manufacturers further increasing their staffing levels, and at a pace similar to September’s 59-month high. Business confidence eased to the weakest since February as some firms expressed concerns over negative GST effects. However, the manufacturers those were optimistic forecasted benefits of GST materialising over the next 12 months," said Dodhia. (RR)
Source Fibre2Fashion News Desk – India