IGI Logo

India's manufacturing sector activity slowed down in the month of July but remained above the neutral level of 50.0, amid ongoing buoyant demand and muted cost inflationary pressures. According to the report, the seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI) fell to 57.7 in July from 57.8 in June. The report noted that with new orders up sharply again, manufacturers expanded production accordingly. Output has increased continuously on a monthly basis since July 2021. The latest rise was substantial, albeit the softest in three months.

As per the report, firms responded to greater workloads by taking on extra staff. The solid pace of job creation was broadly in line with those seen in May and June. This expansion in capacity was not sufficient to prevent a further build-up in backlogs of work, however, given the strength of the rise in new orders. Outstanding business increased for the nineteenth successive month, albeit only slightly. Stocks of purchases also rose rapidly as companies expressed a desire to build inventories given the buoyant demand environment.

On the inflation front, the rate of input cost inflation accelerated to a nine-month high in July, but remained softer than the series average. Input prices increased, amid higher costs for raw materials, in particular cotton. These higher prices for raw materials plus rising labour costs led firms to increase their selling prices. The rate of inflation was solid, but eased to a three-month low. Firms generally expect demand to remain elevated over the coming year, supporting projections for growth of production.