Manufacturing activity in India saw the sharpest contraction in nearly nine years in July, weighed down by the rollout of GST. In the run-up to the implementation of GST on July 1, companies had slowed down dispatches and cut production as they wanted to assess the impact of the new tax measure. But latest indications are that industries are going back to their production schedules as the rollout of the tax measure has been smooth and clarity has emerged across sectors.
At 47.9 in July, down from 50.9 in June, the Nikkei India Manufacturing Purchasing Managers' Index was at its lowest mark since February 2009 and highlighted the first deterioration in business conditions in 2017 so far.
While the PMI survey is an advance indicator, other production data such as eight core sectors remained sluggish in June. The index of industrial production data, which comes with a lag and will be released later this month, will throw more light on the health of the industrial sector.
The survey showed the downturn was widespread across the three broad areas of manufacturing, with intermediate goods producers being the worst affected. The 50-point mark separates expansion from contraction.