September 2020: Factory Activity Hits Over 8-Year High

Buoyed by accelerated increases in new orders and production, India’s factory activity expanded to its highest level in eight and a half years and led to the strongest degree of overall optimism in over four years.

The IHS Markit India Manufacturing Purchasing Managers’ Index increased to 56.8 in September from 52 in August, signalling back-to-back improvements in the health of the sector since the easing of lockdown restrictions in June. A reading above 50 indicates expansion, while below that signals contraction.

As per the survey, manufacturers lifted output for the second straight month in September amid loosened restrictions and higher demand. ‘The increase was sharp and the third-quickest in the history of the survey,” it said.

Similarly, there were back-to-back increases in new business inflows. The rate of expansion picked up to the fastest since early-2012. Moreover, exports also bounced back, following six successive months of contraction, while inputs were purchased at a sharper rate and business confidence strengthened.

Despite strong growth of order book volumes, Indian goods producers signalled another reduction in payroll numbers, according to the survey report. In many cases, this was attributed to efforts to observe social distancing guidelines. Employment has now decreased for six consecutive months.

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