The nationwide lockdown in April, coupled with a crash in export orders, led to unprecedented contraction in manufacturing output, said the monthly Nikkei India Manufacturing Purchasing Managers’s Index (PMI) survey released on Monday. The survey highlighted how reduced demand had led to new businesses collapsing at a record pace in April, while firms sharply trimmed staff numbers.
Manufacturing PMI stood at just 27.4 in April, showing the sharpest deterioration in business conditions across the sector since the data collection began over 15 years ago. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.
PMI had been on a downward curve, registering 51.8 in March — below the eight-year high of 55.3 in January.
“After making it through March relatively unscathed, the Indian manufacturing sector felt the full force of the Covid-19 pandemic in April,” said Elliot Kerr, economist at IHS Markit.
Despite industrial activity partially resuming after April 20, manufacturing activity could not kick in fully. Dearth of labour and raw material remained widespread, while supply chains could not be established, said industry bodies.
“April will undoubtedly be the harshest month of FY21. It had the most stringent lockdown and the worst global conditions. We expect the situation to ease, but there is no chance of growth, given how exports have gone down 35 per cent; automobiles have seen 45 per cent fall, while steel output has tanked 23 per cent,” said D K Joshi, chief economist, CRISIL.
This sentiment was echoed by other experts. “April figures are in line with our expectations, given more than 60 per cent of India’s industry was closed throughout the month,” said Devendra Pant, chief economist, India Ratings and Research.
India’s overall industrial production rebounded in February to a seven-month high of 4.5 per cent, up from January’s 2 per cent.
Figures for March, set to be released next week, are expected to be marginally hit since the lockdown kicked in late (on March 25). But it can take a nasty turn, given how the output of eight core sectors saw record contraction of 6.5 per cent in March.
However in April, the PMI survey pointed to widespread business closures. New orders fell for the first time in two and a half years and at the sharpest rate in the survey’s history, far outpacing ones seen during the global financial meltdown.
In April, the rate of contraction in exports had risen sharply and outbound sales had dropped at the quickest pace in over 15 years, the survey said. This trickled down to manufacturers drastically trimming staff numbers in April. The reduction in employment was also the quickest in the survey's history.