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India’s manufacturing sector growth in January rises to an 8-year high, economic recovery in coming months expected


The economy has shown strong signs of revival as India witnessed the fastest growth of manufacturing activity in nearly eight years in January. The first month of 2020 saw a sharp rise in new business and production, a private survey showed on Monday.

The IHS Markit India Manufacturing Purchasing Manager’s Index rose to 55.3 in January from 52.7 in December. The reading was highest since February 2012 and above the 50-mark, that separates growth from the slump for the 30th straight month.

In a news release, principal economist at IHS Markit, Pollyanna De Lima said, “The PMI results show that a notable rebound in demand boosted the growth of sales, input buying, production and employment as firms focused on rebuilding their inventories and expanding their capacities in anticipation of further increases in new business.”

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The robust growth in manufacturing and production provided a boost in employment as factories hired new workers at the quickest rate in more than seven years since August 2012. New business growth and projects in the pipeline were cited as the main reasons for increase in job creation. A sub-index tracking new orders revealed that the overall demand soared to its highest level since December 2014 and output expanded at its quickest pace in over seven and a half years.

The report said that the consumer goods sector contributed the most the growth, but growth was maintained in intermediate goods also, while capital goods moved to growth after showing contraction in earlier months.

The survey also indicated a strengthening demand from external markets, evident by a brisk increase in export orders since November 2018. Manufactures registered higher sales to clients in Asia, North America, Europe, with favourable exchange rates contributing further to the growth.

The forecast by analysts in a Reuters poll month held last month stated that if the growth momentum is sustained, it could lead to economic recovery in the coming months.

In addition, both input costs and output prices grew at a moderate rate, signifying that the overall inflation may have slackened off after hitting a five year high of 7.35 per cent in December.

Furthermore, the Indian manufacturers had an optimistic view of the production outlook for 2020. The optimism had its origins from strong demand forecast, capacity expansion, new product release, marketing efforts and new client acquisitions.

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