India's manufacturing sector posted a remarkable performance at the end of the final fiscal quarter, as growth of factory orders and production quickened to the strongest in three months. With pressure on supply chains subsiding and raw material availability improving, input cost inflation retreated to its second-lowest mark in two-and-a-half years. Subsequently, goods producers concentrated on rebuilding their stocks.
Increases in buying levels in recent months supported a near-record accumulation of input inventories in March. The seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI) rose from 55.3 in February to 56.4 in March, signalling the strongest improvement in operating conditions in 2023, so far.
That said, the PMI average for the final fiscal quarter (55.7) came in below that recorded in the prior period (56.3 in the third quarter). March data highlighted a further upturn in new business placed with Indian manufacturers. Moreover, the rate of expansion was sharp and the quickest in three months. Firms suggested that marketing efforts bore fruit. Demand resilience and competitive pricing were also cited as growth drivers. Continuing the trend that has been recorded on a monthly basis for a year, new export orders rose in March.
The rate of expansion quickened from February, though remained slight and historically subdued. Ongoing improvements in total sales volumes underpinned another increase in production. Output rose at the quickest pace since last December and one that outpaced its long-run average. Demand resilience also encouraged firms to rebuild their input inventories. Stocks of purchases rose at a sharp rate that was one of the strongest seen in over 18 years of data collection.
Supporting the upturn in input stocks was a 21st consecutive increase in buying levels. Purchasing activity expanded at a marked pace that was the strongest since May 2022. Another factor that stimulated buying levels was a moderation in cost pressures. March data highlighted the second-weakest increase in input prices in two-and-a-half years. In fact, close to 96 percent of firms signalled no change in cost burdens since February.
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