In July, factory activity in India surged on the back of heightened domestic demands and export order. The development sees an increase in job creation for the first time since the onset of the Coronavirus-induced COVID-19 pandemic.
According to a survey compiled by IHS Markit, India’s Manufacturing Purchasing Managers’ Index rose to 55.3 in July, up from 48.1 in June, well above the 50-level which separates growth from contraction.
“Output rose at a robust pace, with over one-third of companies noting a monthly expansion in production, amid a rebound in new business and the easing of some local COVID-19 restrictions,” said Pollyanna De Lima, economics associate director at IHS Markit.
Despite facing a devastating COVID-19 second wave in April and in May, Indian manufacturing trod to record these numbers after it managed to largely contain the spread of disease which allowed state government to ease lockdown restrictions.
While India continues to report more than 40,000 cases per day, the staggered re-opening of the economy has induced higher demand and sales, leading to a sharp expansion in output.
Export orders grew at their fastest pace since April 2021.
For the first time since March 2020, employment levels touched new heights, breaking a 15-month chain of job shedding.
It is to be seen how Asia’s third-largest economy moves to contain new coronavirus variants, which poses the biggest risk to weakened forecasts.
While the lack of availability of raw materials along with higher freight costs, drove up input cost prices, the pace of increase was at a seven-month low.
Further, despite higher input costs, output costs rose only marginally, in a sign that companies absorbed the extra cost to boost sales and remain competitive.
Incidentally, India’s central bank, the Reserve Bank of India, is not expected to raise interest rates until next fiscal year, based on predictions that inflation is forecasted to remain within its target band of 2%-6% in 2021-2022.