Alarm bells ring for India’s factory activity growth as Coronavirus scare poses threat

After weak manufacturing pulled down Q3FY20 GDP growth, the factory activity growth fell in February even as overall conditions remain firm, a survey released on Monday said.

After weak manufacturing pulled down Q3FY20 GDP growth, the factory activity growth fell in February even as overall conditions remain firm, a survey released on Monday said. The manufacturing Purchasing Managers’ Index (PMI) declined to 54.5 last month from January’s 55.3. A Reuters poll of economists had predicted PMI at 52.8. “Alarm bells are ringing for Indian goods producers as the COVID-19 outbreak poses threats to exports and supply chains. Businesses became less confident about the year-ahead outlook for output, in turn restricting hiring activity,” de Lima also said. The modest weakening in demand and output brought down PMI, the survey showed. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.

“Factories in India continued to benefit from strong order flows in February, from both the domestic and international markets,” said Pollyanna De Lima, principal economist at IHS Markit, in the survey. The GDP growth slowed to nearly 7-year low to 4.7 per cent in the third quarter (with previous quarter’s growth being revised upwards) of FY20 on weak manufacturing. The manufacturing is expected to see  0.9 per cent growth, the lowest since 2012-13 in the current GDP series, the government data on Q3FY20 GDP released by the government on Friday showed.

The retail inflation is expected to fall as both input cost and output charge growth has slowed down in the previous month, the PMI survey added. The policymakers may now get little headroom to tackle significant issues after the latest high inflation-low growth conundrum, it said. “Price data continued to highlight a lack of inflationary pressure in the sector. Only modest increases in input costs and output charges were recorded in February, a trend that has been a key theme of the manufacturing PMI survey for over a year,” added de Lima.

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