Indian factory growth gains momentum in November, input costs at 40-month low

India's manufacturing sector experienced a rebound in growth during November, propelled by strong demand and a notable reduction in input costs, according to a private survey. 

The Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, climbed to 56.0 last month from October's 55.5, signaling robust expansion for almost two and a half years.

This positive trend aligns with India's recent economic performance, recording a 7.6 per cent growth in the last quarter. Despite a slight dip from the previous quarter's 7.8 per cent, India remains on track to be the fastest-growing major economy this fiscal year.

The survey highlighted accelerated output and new orders in November, indicating increased demand and sustained job creation for the eighth consecutive month. 

Business confidence for the next 12 months remained high, although the future output sub-index slipped to 62.2, a seven-month low, due to rising inflation expectations. 

Notably, domestic demand remained robust, while international demand faced a setback, resulting in new export orders reaching a five-month low.

Despite the overall positive outlook, there were concerns about rising inflation, leading to a cautious approach in passing on the benefits to customers. 

Input costs grew at the slowest pace since July 2020, attributed to improved availability at suppliers amid subdued global demand for inputs. However, not all the cost reductions were reflected in output prices, which only eased to a seven-month low.

Pollyanna De Lima, Economics Associate Director at S&P Global, expressed optimism about India's manufacturing sector as 2023 concludes, anticipating continued strong performance in 2024. However, she noted that some apprehensions lingered regarding near-term price increases, reflecting in the data for business sentiment.

In a related context, retail inflation in India saw a decline to a four-month low in October but remained above the Reserve Bank of India's (RBI) 4 per cent medium-term target.

RBI Governor Shaktikanta Das emphasised India's vulnerability to recurrent food price shocks and reiterated the central bank's commitment to closely monitoring inflation while supporting economic growth.

(With Reuters Inputs)