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S&P Global India Manufacturing PMI indicates highest activity in nearly three years

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The S&P Global India Manufacturing Purchasing Managers' Index (PMI) surged to 58.6 in August.

It marks the highest activity level in almost three years. 

This rise comes from manufacturing firms experiencing a substantial expansion in order books and output levels.

It outpaced the previous month's score of 57.7 in July.

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The PMI index registers growth in activity levels when exceeding the 50-point threshold.

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It has now maintained a streak of growth for 26 consecutive months. 

This consistent trend underlines the resilience and vitality of India's manufacturing sector.

Manufacturing companies displayed remarkable resilience despite increasing input costs by replenishing their inventories at the second-highest rate in over 18 years. 

Interestingly, they refrained from raising selling prices in tandem with the higher costs. 

This led to the slowest growth in output costs over the past four months, even as input costs escalated at the fastest pace in a year.

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The August report saw a remarkable growth in new orders, reaching the highest level since January 2021. 

The export segment also witnessed a significant uptick, with demand soaring to its highest point since November of the previous year. 

Manufacturers participating in the survey reported securing new contracts from international clients.

Those include Bangladesh, China, Malaysia, Singapore, Taiwan, and the US.

To manage the increased workload, Indian manufacturers adopted a flexible approach by hiring both permanent and temporary staff on a part-time and full-time basis. 

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However, the employment growth rate slowed, marking the slowest pace in four months.

Pollyanna De Lima, the Economics Associate Director at S&P Global Market Intelligence, said: “The presence of stronger cost inflationary pressures serves as a reminder of the challenges inherent in managing growth. 

“Firms addressed rising input prices by lifting selling charges. However, the need to maintain competitiveness helped restricted charge inflation."

Companies did raise selling charges to offset input cost increases.

But the imperative to maintain competitiveness curtailed the extent of these charge increases.

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Ms. De Lima expressed optimism about the sector's role in bolstering economic growth in the second quarter of 2023-24, given the robust performance illustrated by the manufacturing PMI. 

Manufacturing Gross Value Added (GVA) grew by 4.7 percent in the first quarter of the fiscal year 2023-24, according to estimates released by the National Statistical Office on August 31.

She added: “Companies’ strategic focus towards a global orientation were evident via a sharp and quicker expansion in international sales. 

“Export-centric tactics should help ensure that production remains on an upward path in the coming months.”

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