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1 August 2017
India's
manufacturing sector's output declined last month due to the launch of the
Goods and Services Tax (GST) and weak demand, a key macro-economic data showed
on Tuesday.
The
Nikkei India Manufacturing Purchasing Managers' Index (PMI), which is a
composite indicator of manufacturing performance, stood at 47.9 in July from
the index reading of 50.9 in June 2017. The
Total Investment & Insurance Solutions
An
index reading of above 50 indicates an overall increase in economic activity,
and below 50 an overall decrease. The Total
Investment & Insurance Solutions
As
per the figures, the Nikkei India Manufacturing PMI was at its lowest mark in
July since February 2009 and highlighted the first deterioration in business
conditions in 2017 so far.
"Manufacturing
growth in India came to a halt in July, with the PMI down to its lowest mark in
almost eight-and-half years amid widespread reports that the sector has been
adversely affected by the implementation of the goods and services tax,"
said Pollyanna De Lima, economist at IHS Markit and the author of the report. The Total Investment & Insurance Solutions
"The
reductions in output, new orders and purchasing activity were all the steepest
since early-2009. The downturn was broad-based across all subsectors covered by
the survey, with output scaled back among firms in the consumer, intermediate
and investment goods categories amid falling order books." The Total Investment & Insurance Solutions
According
to the Nikkei India Manufacturing PMI report, downturn was widespread across
three broad areas of manufacturing, with intermediate goods producers being the
worst affected.
The
report pointed out that "incoming new work" dropped for the first
time in the year-to-date period and at the steepest pace since
early-2009. The Total Investment & Insurance
Solutions
"The
weakening trend for demand, relatively muted cost inflationary pressures and
discounted factory gate charges provide powerful tools for monetary policy
easing, which has the potential to revive economic growth," the IHS Markit
economist said.
"Upcoming
PMI releases will show whether underlying conditions remain on the downside or
if July's contraction was a temporary blip. Goods producers foresee the latter,
with panellists widely commenting that a lack of clarity regarding tax rates
caused confusion among suppliers and manufacturers themselves when agreeing on
prices."
On
the bright side, the report added that 12-month outlook for output remained
positive in July, with companies expecting more clarity regarding the GST to
support growth. The Total Investment
& Insurance Solutions
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