Manufacturing Sector Index Contracts For First Time In 11 Months: Report


India’s manufacturing index contracted for first time in 11 months in June 2021

The manufacturing sector in India declined during June 2021 owing to the severe second wave of Coronavirus pandemic and lockdowns announced by several states.

The IHS Markit India Manufacturing Purchasing Managers Index (PMI), which is adjusted seasonally, registered 48.1 in June 2021 as against 50.8 in May 2021. It was below the critical no-change mark of 50 for the first time since July 2020, thus showing a contraction in 11 months.

The stringent measures undertaken to curb the spread of the infection, had a negative impact on demand and there were contractions in factory orders, production and even purchase volumes. Most significantly, job losses continued due to poor business sentiments.

The PMI averaged 51.5 in the opening quarter of 2021-22. Also the stretch of new order growth that started in August 2020 came to an end in June, with firms linking the deterioration in demand to the pandemic.

Despite being consistent, the contraction rate was lesser than witnessed at the time of the beginning of the pandemic in March 2020.

The pandemic-induced restrictions also curbed global demand for Indian products. New export orders fell for the first time in 10 months, even though the fall was moderate.

Closure of businesses and drop in new orders combined with the pandemic, led to a fall in output of Indian manufacturers. The decline was moderate compared to the one witnessed in the first half of 2020, but ended a 10-month growth trajectory.

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