India's manufacturing activity grew at the strongest pace since December 2012, showing signs of recovery after the twin shocks of demonetisation and the implementation of the Goods and Services Tax (GST).
The Nikkei India Manufacturing Purchasing Managers’ Index rose to 54.7 in December compared to 52.6 in November, according to a statement by IHS Markit, which compiles the index. A reading below 50 indicates contraction and a number above it signals expansion. India’s manufacturing PMI has remained in the expansion zone for most of this fiscal, with the exception of a contraction reported in July.
In December, the rise in manufacturing activity was driven by a sharp uptick in output and new orders. Output rose at its fastest pace since December 2012, while new orders increased at their quickest since October 2016. Demand conditions improved in both domestic and international markets.
Job creation also increased at the quickest pace in more than five years in response to the growing business activity, the release said.
The strong pick-up in manufacturing activity comes at the close of a turbulent year for the Indian economy. The impact of demonetisation and the GST has led to volatility across business segments.
Other economic indicators have also suggested some revival of strength in industry, albeit on a low base. Growth in the eight core sectors rose to 6.8 percent in November compared to 3.2 percent in November last year.
As growth picks up, price pressures are also starting to rise.
Input cost inflation accelerated to the strongest since April, said IHS Markit. Firms raised their output charges for the fifth month straight. However, despite a 10-month high, inflation was modest and weaker than the long-run series average, the report noted.
(This article was originally published on BloombergQuint)
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