India’s Manufacturing Sector Ends 2021 On Strong Note Despite PMI Slips In December

According to the data by IHS Markit, the manufacturing purchasing managers’ index (PMI) fell to 55.5 per cent in December from 57.6 per cent in November

The PMI stayed above the 50 mark that separates growth from contraction for a sixth month. Image: Getty

New Delhi: India’s manufacturing sector improved in 2021 and ended the year on a solid note, with growth of new work and production remaining sharp despite losing momentum, according to a report in Reuters.

The data released by IHS Markit showed that the manufacturing purchasing managers’ index (PMI) fell to 55.5 per cent in December from 57.6 per cent in November. However, PMI stayed above the 50 mark that separates growth from contraction for a sixth month.   

The report reinforces evidence of a continued recovery in India, Asia’s third-largest economy, from the coronavirus pandemic-induced slowdown. Rising price pressures may add to expectations the Reserve Bank of India will tighten monetary policy earlier than thought, like some other central banks.

Pollyanna De Lima, economics associate director at IHS Markit, said in a release, “The last PMI results of 2021 for the Indian manufacturing sector were encouraging, with the economic recovery continuing as firms were successful in securing new work from domestic and international sources.”

“Higher sales underpinned a further upturn in production and companies carried on with their restocking efforts.”

While the latest survey showed the new orders sub-index, a proxy for domestic demand, slipped to 58.4 in December, it remained above the long-term average since the gauge was introduced in March 2005. That encouraged firms to maintain solid output.

Optimism about future output strengthened last month, however, concerns about supply-chain disruptions, the rapid spread of the new Omicron variant of coronavirus, and inflationary pressures dampened sentiment.

According to a latest report by the Centre for Monitoring Indian Economy (CMIE), the unemployment rate of the country hit a four-month high in December. The jobless rate rose to 7.9 per cent in December from 7.0 per cent in November, its highest since 8.3 per cent in August.