Manufacturing growth slows in April amid election uncertainty

May 02, 2019 15:00 IST

Firms seem to have adopted a wait-and-see approach on their plans until public
policies become clearer upon the formation of a government.

The country's manufacturing sector performance eased to an eight-month low in April

as new business growth moderated, curbed by the elections and a challenging
economic environment, a monthly survey showed on Thursday.

The Nikkei India Manufacturing Purchasing Managers' Index declined from 52.6 in
March to 51.8 in April, reflecting weakest improvement in business conditions since
August 2018.

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This is the 21th consecutive month that the manufacturing PMI remained above the
50-point mark.

In PMI parlance, a print above 50 means expansion, while a score below that denotes
contraction.

April PMI data indicated that softer increase in new orders restricted growth of
output, employment and business sentiment.

"Although remaining inside expansion territory, growth continued to soften and the
fact that employment increased at the weakest pace for over a year suggests that
producers are hardly gearing up for a rebound," said Pollyanna De Lima, principal
economist at IHS Markit and author of the report.

When looking at reasons provided by surveyed companies for the slowdown, disruption
arising from the elections was a key theme, Lima said, adding that "firms also seem
to have adopted a wait-and-see approach on their plans until public policies become
clearer upon the formation of a government".

The general election that began on April 11, is currently underway.

Votes will be counted on May 23.

On the prices front, input cost inflation eased to a 43-month low while the rate of
charge inflation was marginal and below its long-run average.

"With price pressures in the manufacturing economy cooling and growth losing
momentum, it's increasingly likely that the RBI may cut its official rate for a
third successive time in June," Lima said.

The next meeting of RBI's Monetary Policy Committee is scheduled on June 3-6.