India Feb manufacturing sees new orders expand sharply: IHS Markit

February Purchasing Managers' Index (PMI) data showed further improvement in the health of Indian manufacturing sector as firms responded to increases in new work intakes by lifting production, input buying and stocks of purchases.

However, employment decreased further amid coronavirus disease 2019 (Covid-19) restrictions related to shift work, according to the latest IHS Markit Manufacturing PMI released on Monday.

Strengthening demand for raw materials and semi-finished items exerted upward pressure on input cost inflation, which picked up to a 32-month high.

Factory gate charges also rose albeit at a modest and softer pace. Posting 57.5 in February, the seasonally adjusted IHS Markit India Manufacturing PMI highlighted a strong improvement in operating conditions that was broadly similar to that recorded in January (57.7).

The headline figure remained above its long-run average of 53.6. Better demand conditions and successful marketing campaigns reportedly underpinned a further increase in new orders during February.

Although easing from January, the pace of growth remained sharp in the context of historical data. New export orders also rose halfway through the final quarter of fiscal year 2020-21 albeit at a modest rate that was softer than in January.

The Covid-19 pandemic restricted international demand for Indian goods. In response to another robust increase in total new orders, production was raised again in February.

The pace of expansion eased from January but was nevertheless sharp and among the quickest seen over the past nine years. February data pointed to the strongest increase in input inventories in the survey history as firms reacted to rising production needs by lifting purchasing activity.

The expansion in input buying was the fastest in almost a decade. In turn, robust demand for inputs led suppliers to hike their fees.

"Once larger parts of the population are immunised against Covid-19 and restrictions start to be lifted, companies expect a gradual improvement in economic conditions which they hope will translate into output growth," said Pollyanna De Lima, Economics Associate Director at IHS Markit.

"The overall degree of business optimism was the joint-highest for three months," she said adding the upbeat mood supported the fastest increase in input buying for almost a decade as companies focused on rebuilding theirs input stocks to fulfil demand growth.

The IHS Markit India Manufacturing PMI is compiled from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. The panel is stratified by detailed sector and company workforce size based on contributions to GDP.

IHS Markit is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government.