Manufacturing activity shrinks again in May, PMI at 30.8

Demand was subdued despite both input and output prices declining for a second straight month, signaling easing in overall inflation, which would give the central bank room to ease policy further. The RBI has already taken a series of aggressive p...

New Delhi: India’s manufacturing activity continued to shrink in May making firms cut staff numbers at the quickest pace since data collection began over 15 years, a private survey showed on Monday.

The seasonally adjusted IHS Markit India Manufacturing PMI rose to 30.8 in May from 27.4 in April, pointing to another substantial decline in the health of the Indian manufacturing sector, albeit one that was slightly softer than recorded in April. A reading above 50 indicates expansion while lower than that shows contraction.

“The latest PMI data suggested that Indian manufacturing output fell further in May,” said Eliot Kerr, Economist at IHS Markit.

As per the report, weak demand from international markets added to the deteriorating sales trend, with new business from abroad plunging further in May. Anecdotal evidence suggested that global measures to stem the spread of COVID-19 continued to stifle exports.

Lower production requirements saw Indian manufacturers continue to reduce worker numbers in May. Moreover, the rate of workforce contraction accelerated to the fastest in the survey's history, eclipsing the previous record set in April, it said.


“The further reduction in May highlights the challenges that businesses might face in the recovery from this crisis, with demand remaining subdued while the longevity of the pandemic remains uncertain,” Kerr added.

Official data released last week showed India’s gross domestic product (GDP) growing at the slowest pace in 11 years in the fourth quarter and FY20 as the Covid-19 crisis took hold in March, adding to pressures on an already slowing economy, aggravated by a nationwide lockdown which was imposed on March 25.

However, Indian manufacturers remained optimistic towards the one-year business outlook in May. While confidence was supported by expectations for a return to growth once all coronavirus-related restrictions are lifted, the degree of positivity eased slightly from April and remained historically subdued.

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