India’s factory growth falls slightly in June, but remains strong

By India Today Business Desk: India’s manufacturing sector sustained strong growth in June, although at a slightly slower pace compared to May, as per a private survey.

The Manufacturing Purchasing Managers’ Index (PMI) compiled by S&P Global stood at 57.8 in June, down from May’s 58.7 but still above the 50-mark that separates expansion from contraction.

Despite facing higher inflationary pressures, robust demand supported the industry’s performance.

The survey indicated persistent strong demand for Indian-made products, both domestically and internationally.

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New orders and output experienced significant growth, driven by strong demand from both domestic and foreign markets. This marked the 15th consecutive month of foreign demand growth. The positive momentum also boosted business confidence, leading to an increase in employment and quantity of purchases.

While input costs increased due to higher prices for labor and certain raw materials, the rate of inflation was only marginally higher than in May and below the long-run average.

Companies passed on these expenses to clients, resulting in the output prices index reaching a 13-month high. Manufacturers were able to adjust their pricing strategies in response to buoyant demand, maintaining a competitive edge.

Inflation remains within the Reserve Bank of India’s comfort zone of 2-6%. However, the central bank has not ruled out the possibility of future interest rate hikes.

The repo rate has remained at 6.50% since April, following a series of rate hikes totaling 250 basis points since May 2022. The RBI’s monetary policy is anticipated to remain unchanged until next year.

Overall, India’s manufacturing sector continues to exhibit strength, driven by robust demand both domestically and internationally.

Also Read | India’s manufacturing PMI rises to 31-month high in May, boosts job growth

Despite a slight slowdown in growth, the industry remains in expansionary territory, fostering business confidence and optimism for future activities.

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