India’s manufacturing sector revving up as firms kick it into gear amid accelerating demand

May saw the strongest improvement in the health of India’s industrial sector in three consecutive months. The growth was driven by a significant upturn in demand for consumer goods.

Marking a recovery in the country’s manufacturing sector, the Purchasing Managers’ Index (PMI) expanded last month, rising to 52.7 against 51.8 in April.

PMI, an indicator of the economic health of a sector, is based on a survey carried out among purchasing executives in over 400 companies.The corporations are divided into eight major categories: basic metals, chemicals and plastics, electrical and optical, food and drink, mechanical engineering, textiles and clothing, timber and paper, and transport.

A reading above 50 means expansion in the sector on a monthly basis, anything below indicates contraction.

The latest results indicate the 22nd consecutive month that the country’s manufacturing PMI remained above the 50-point mark.

“A revival in new order growth promoted a faster upturn in manufacturing production, as Indian firms sought to replenish inventories utilized in May to fulfill strengthening demand,” said Pollyanna De Lima, principal economist at IHS Markit, which compiled the data.

The survey also revealed increasing employment. When it comes to inflation, analysts say that the price pressures remained relatively muted, with goods producers leaving selling prices unchanged on the back of a mild rise in overall cost burdens.

“When we look at the survey's over 14 year history, the sector is growing at a below-trend rate,” De Lima said, stressing that “shortening the horizon to the last two years, May's increases in output, total order books and exports all outperformed.”

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