India’s Factory Activity Increases At Its Fastest Pace In Over 10 Years As Demand Recovers Strongly

India’s factory activity increased at its fastest pace in over a decade as a recovery in demand from coronavirus-related disruptions in noticed, Reuters reports.

However, companies continued to cut down workforce for the seventh consecutive month.

IHS Markit compiles the Nikkei Manufacturing Processing Managers’ Index, whose reading expanded to 58.9 in October as compared to 56.8 in September. This is the highest recorded reading in India since May 2010.

“Levels of new orders and output at Indian manufacturers continued to recover from the Covid-19 induced contractions seen earlier in the year. Companies were convinced that the resurgence in sales will be sustained in coming months, as indicated by a strong upturn in input buying amid restocking efforts,” stated economics associate director at IHS Markit Pollyanna De Lima.

She further added, “Confidence towards the year-ahead outlook for production improved as firms hoped that fewer Covid-19 cases and the reopening of other businesses could boost output growth.”

Output and new orders are the two factors that track overall demand. Both of them expanded at their sharpest rates in more than 12 years. Moreover, business optimism rose to its highest level since August 2016. International demand developed at its fastest pace since December 2014 too.

Though the firms carried the burden of rising price pressures, input and output prices shot up swiftly in October. This could result in the overall retail inflation remaining above the Reserve Bank of India’s medium-term target of 2-6 per cent in the forthcoming months.