BENGALUR (Reuters) – The activity of Indian factories increased in August for the first time in five months, as the easing of closure restrictions led to an uptick in domestic demand, a survey of personal companies that corporations continued to cut jobs on Tuesday.
But the uptick is unlikely to mean an immediate recovery in India’s economy, which at its fastest speed at 23.9% consistent with the year in the last quarter, is expected to remain in recession this year, revealed a Reuters ballot on Friday.
The Nikkei Manufacturing Purchasing Managers Index, compiled through IHS Markit, rose from 46.0 in July to 52.0 in August, above 50 points separating the expansion from contraction for the first time since March.
“August’s knowledge showed progress in the suitability of India’s production sector, indicating movements towards a slowdown in the current quarter,” said Shreeya Patel, IHS Economist Markit.
“However, not everything was positive in August, delivery times have lengthened at another pace amid the continuous interruptions of COVID-19.”
While sub-indexes tracking aggregate demand and production reached their highest levels since February and increased for the first time in five months, foreign demand for the sixth consecutive month, its longest decline since March 2009.
In addition, corporations have reduced their size for the fifth consecutive month, adding to the millions of people who have already lost their jobs due to coronavirus-like disruptions, which is spreading faster in India than anywhere else in the world.
Although input costs have risen at the fastest rate in just two years, corporations have reduced product costs for 4 months to stimulate demand.
This is to alleviate the overall inflationary pressure, which has remained above the 4% medium-term reserve bank’s medium-term target since September 2019.
Accelerated inflation led the central bank to maintain interest rates last month, however, according to a Reuters survey, it will reduce its key interest rate through 25 core issues next quarter to 3.75%, and then pause at least until early 2022.
However, the factory’s survey showed that optimism about the next 12 months reached its point in a year.
(Report through Indradip Ghosh; edited through Kim Coghill)