Indian production growth eases amid export decline in March: IHS Markit

Business conditions in the Indian manufacturing sector improved at the slowest rate for four months in March, hampered by softer rises in both output and new business, according to IHS Markit India Manufacturing Purchasing Managers' Index (PMI) released on Thursday.

Contributing to the downward momentum was a record decline in new export orders, with international demand faltering amid the global coronavirus disease 2019 (COVID-19) outbreak.

There was also evidence that the virus negatively impacted the supply-side of the sector, with suppliers' delivery times lengthening for the first time in five months.

Looking forward, confidence towards the business outlook plummeted to a record low, with positivity tapered by COVID-19 concerns.

At 51.8 in March, the headline seasonally adjusted IHS Markit India Manufacturing PMI fell from 54.5 in February. The reading signalled the slowest improvement in business conditions since November 2019 and one that was modest overall.

Weighing on the headline figure was the slowdown in production growth during March. The latest expansion extended the current run that began in August 2017 and was solid overall.

Similar to the trend in output, new orders placed with Indian manufacturers rose at a slower pace in March. Underlying data suggested that the result was driven by weaker foreign demand, as new export business fell sharply.

In fact, the decline in international sales was the fastest since September 2013 amid widespread lockdowns due to the COVID-19 pandemic.

Manufacturing firms continued to increase their staff numbers in March, but the pace of hiring remained subdued. The rate of workforce expansion was unchanged from February's recent low.

"The Indian manufacturing sector remained relatively sheltered from the negative impact of the global coronavirus outbreak in March. However, there were pockets of disruption and a clear onset of fear among firms," said Principal Economist at IHS Markit Pollyanna de Lima.

New orders and output both grew at softer rates, but those readings were relatively tame compared to those seen at goods producers in Europe and other parts of Asia.

The most prominent signs of trouble came from new export orders and future activity indices, which respectively indicated tumbling global demand and softening domestic confidence.

"Should the trajectory of injections continue in the same vein, the Indian manufacturing sector can expect a much sharper negative impact in the coming months, similar to the scale seen in other countries," said de Lima.

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.

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