The purchasing managers’ index (PMI) for April rose to 55.5 after falling to a seven-month low of 55.4 in March. Vivek Prakash/Bloomberg (Bloomberg)(HT_PRINT)
The purchasing managers’ index (PMI) for April rose to 55.5 after falling to a seven-month low of 55.4 in March. Vivek Prakash/Bloomberg (Bloomberg)(HT_PRINT)

Factory output sees marginal growth in April

  • This is in line with trade data issued by the commerce ministry on Sunday which showed merchandise exports stayed robust in April despite localized lockdowns, reflecting increasing external demand for Indian goods.
By Asit Ranjan Mishra, New Delhi
PUBLISHED ON MAY 04, 2021 01:02 AM IST

Exports saved the day for Indian manufacturing in April, at a time the second pandemic wave continues to destroy domestic demand.

Manufacturing activity in April improved a tad as new export orders rose at the fastest pace since October, cancelling out the impact of new domestic factory orders and output falling to eight-month lows. Data released by analytics firm IHS Markit showed the purchasing managers’ index (PMI) for April rose to 55.5 after falling to a seven-month low of 55.4 in March. A figure above 50 indicates expansion, while sub-50 signals contraction.

New export orders grew for the eighth consecutive month in April. “The rise was associated with a pick-up in international demand for Indian goods, with all three monitored sub-sectors registering expansion,” IHS Markit said.

This is in line with trade data issued by the commerce ministry on Sunday which showed merchandise exports stayed robust in April despite localized lockdowns, reflecting increasing external demand for Indian goods. Exports grew at a record 197% to $30.21 billion in April due to a low base of last year when India entered a nationwide lockdown.

Pollyanna De Lima, economics associate director at IHS Markit, said the downturn in employment eased in April and business confidence towards the one-year outlook strengthened. “The headwinds facing manufacturers cannot be ignored, however. The surge in covid cases could dampen demand further when firms’ financials are already susceptible to the hurdle of rising global prices. April saw the steepest increase in input costs for nearly seven years drive the sharpest upturn in output charges since October 2013. Data for the coming months will be important at verifying whether client demand is resilient to these challenges or if producers will have to further absorb cost burdens themselves to secure new work,” she added.

Stocks of finished goods declined in April as companies reportedly utilized existing inventories to meet sales requirements. “Some firms also linked the fall in post-production stocks to a lack of raw material availability. Underlying data showed a further deterioration in vendor performance, but supplier delivery times lengthened to a lesser extent in April. Delays were often blamed on the covid-19 pandemic, transportation issues and material shortages,” the analytics firm said.

The PMI survey participants also signalled a steep increase in input costs, the quickest pace since July 2014, and upward revisions to selling prices.

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