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India's Factory Activity Barely Grows in October as GST Stings

Indian consumer inflation held steady at 3.28 percent in September, but is expected to accelerate over coming months led by higher petrol and diesel prices, complicating the task of the Reserve Bank of India as it seeks to stimulate the economy with more rate cuts.

Rounak Kumar Gunjan | News18.com@Rounak_T

Updated:November 1, 2017, 6:06 PM IST
India's Factory Activity Barely Grows in October as GST Stings
File photo: A worker operates a lathe inside a small scale manufacturing unit in Ahmedabad, India, April 12, 2016. REUTERS/Amit Dave/Files

New Delhi: Nikkei India Manufacturing Purchasing Manager’s Index (PMI) fell to 50.3 in October from 51.2 in September as output rose only fractionally while new business orders stagnated.

“At 50.3 in October, the Nikkei India Manufacturing Purchasing Managers’ Index fell from 51.2 in September. This indicated a broad stagnation in the health of the manufacturing sector during October,” said the report released on Wednesday.

The report comes at a time when India has leap-frogged 30 positions on the World Bank’s ease of doing business rankings. India ranked 100th among 190 economies.

Meanwhile, the monthly report stated that the level of business confidence eased to the weakest since February.

“Lack in business confidence along with lack in demand has a lot to do with the Goods and Services Tax (GST). Amongst lot of confusion that both the consumers and producers were going through, numbers were sure to fall. Now talking of ease of doing business, demand happens to be a natural progression once business is established. Therefore it is a little confusing to see ease of doing business rising and demand falling,” said D K Shrivastav, chief policy advisor, EY, a consultancy.

Panelists in the Nikkei report cited subdued demand conditions leading to slackened purchasing activity and reduced pre-production inventories.

Commenting on the Indian Manufacturing PMI survey data, Aashna Dodhia, Economist at IHS Markit and author of the report, said: “India’s manufacturing companies struggled somewhat as the recent recovery enjoyed by the sector lost impetus in October. Disappointingly, manufacturing production rose at the weakest pace in the current sequence of growth. Inflows of new orders stagnated as the negative effects arising from the implementation of GST continued to dampen demand levels. Furthermore, overseas demand for Indian goods dipped to the greatest extent since September 2013.”

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| Edited by: Huma Tabassum
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