Intense Heat Wave Brought Down Manufacturing Growth: Survey

New Delhi: Though India’s manufacturing growth slowed to a three-month low in the month of May due to intensive heat wave and rising production costs that hampered the volumes, the sector remained in expansionary territory in the same month. The headline figure was nearly four points higher than its long-run average and the May data showed a further upturn in Indian factory production, a private survey showed on Monday.

As per the survey conducted by seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index or PMI, the index fell from 58.8 in April to 57.5 in May, signalling a slower but substantial improvement in the health of the sector. In the PMI parlance, a print above 50 means expansion while a score below 50 denotes contraction. However, the index had climbed to a 16-year high of 59.1 in March.

However, Indian manufacturers expressed the highest level of positive sentiment towards growth prospects in nearly nine-and-a-half years, fuelled by advertising and innovation, alongside expectations that economic and demand conditions will remain favourable. Meanwhile, Reuters has also reported that the government is learnt to have plans to increase India’s share of global manufacturing to 5 per cent by 2030 and 10 per cent by 2047.

As per the survey, the slowdown was attributed to reduced working hours amid intensive heatwave and rising production costs. “Panelists cited heat waves as a reason for lower work hours in May, which may have affected production volumes. In contrast, new export orders rose at the fastest pace in over 13 years, with a broad-based demand across geography,” said Maitreyi Das, Global Economist at HSBC.

“The manufacturing sector remained in expansionary territory in May, albeit the pace of expansion slowed, led by a softer rise in new orders and output. On the price front, higher raw material and freight costs led to a rise in input prices. Manufacturers were only able to pass on a part of this increase to consumers, resulting in a squeeze in manufacturing margins,” said Das.

The survey also noted that new orders rose at a substantial pace that was nonetheless the slowest in three months. “The rise was associated with marketing efforts, demand strength and favourable economic conditions. The growth was reportedly stymied by competitions and election-related disruptions,” the survey said, adding that in contrast to the trend for total sales, new export orders rose at a faster pace in May.

“The upturn in international sales was the strongest in over 13 years as manufacturers witnessed gains from customers across several countries in Africa, Asia, the Americas, Europe, and the Middle East. The ongoing strong sales performances, combined with upbeat growth forecasts, fuelled job creation in May,” the survey added.