Manufacturing output grew at its slowest pace in four months in April as new orders stagnated and input costs rose sharply, a monthly survey showed today, adding to the clamour for further interest rate cut by RBI.
The Nikkei/Markit India Manufacturing Purchasing Managers’ Index (PMI) – a composite indicator of manufacturing sector performance – fell from 52.4 in March to 50.5 in April.
A reading above 50 represents expansion while one below this level means contraction. However, this is the slowest pace of expansion in business conditions in four months.
“PMI data for India show a marked slowdown in output expansion during April, as growth of new work ground to a halt following a robust increase in the prior month,” Pollyanna De Lima, Economist at Markit and author of the report said.
Following three consecutive months of growth, Indian manufacturers saw the incoming new orders broadly stagnating in April. Though new orders from abroad continued to rise, the new export orders grew at the slowest pace since last October.
On employment front, the manufacturing sector hiring remained broadly unchanged – a trend that has been evident for almost two years, the survey showed.
Input costs increased at the fastest rate in 11 months, whereas charge inflation eased since March, as part of the additional cost burden was passed on to clients as selling prices rose further.
“A softer overall increase in output prices meanwhile suggests a strongly competitive environment, as cost inflation in fact accelerated to the fastest since May 2015,” Lima added.
In the first bi-monthly monetary policy review for 2016-17 announced on April 5, RBI governor Raghuram Rajan reduced the key interest rate by 0.25 per cent and introduced a host of measures to smoothen liquidity supply.
While this was the first rate cut after a gap of six months, RBI has lowered its rate by 1.5 per cent cumulatively since January last year.
However, the industry still wants further rate cuts from the central bank to boost investment and the slowing pace of growth in manufacturing sector will add to the clamour for additional easing of rates by RBI.