On the prices front, input cost inflation moderated to one of the lowest rates seen in over a decade. Subsequently, there was only a marginal rise in selling prices. This may prompt the Reserve Bank of India’s (RBI’s) Monetary Policy Committee (MPC) to cut rates.
“In light of the weak results for economic growth and muted inflationary pressures signalled by the PMI
data, we expect to see further monetary easing in the months ahead,” Lima said. The MPC will take a call on the repo rate cut on Friday.
Manufacturing growth was worse in the second quarter (Q2) of 2019-20 than that in the first quarter. PMI
stood at 51.8 in Q2 versus 52.2 in the previous quarter.
“We’ve seen the gradual slowdown in manufacturing sector conditions continue in the second quarter of fiscal year 2019/20, with the PMI average for the quarter at its joint-lowest since the same period in 2017,” said Lima.
India’s economic growth has slumped for the fifth straight quarter to an over six-year low of 5 per cent in the three months ended June, as consumer demand and private investment slowed amid deteriorating global environment. Industrial sector, which also comprises electricity and mining apart from manufacturing, constitutes around 15-16 per cent of the country’s gross domestic product.
The survey noted that business confidence sank to one of the lowest levels seen in over two-and-a-half years.
Some firms expect a pick-up in demand and investment in marketing to lift output in the year ahead, while others were concerned about competitive pressures and tough market conditions.
“In September alone, forward-looking indicators such as business confidence and quantities of purchases were down, suggesting that companies are bracing themselves for difficult times ahead,” Lima said.