India’s factory activity expanded at its slowest pace in eight months in April as growth in new orders and output dipped as national elections got under way, a private business survey found.
Optimism among manufacturing firms also ebbed in April as they remain concerned about what policies the new government will adopt when it takes office by end-May.
The Nikkei Manufacturing Purchasing Managers’ Index, compiled by IHS Markit, fell to 51.8 last month from March’s 52.6. It has stayed above the 50-mark separating expansion from contraction for nearly two years.
“When looking at reasons provided by surveyed companies for the (April) slowdown, disruptions arising from the elections was a key theme,” noted Pollyanna De Lima, principal economist at IHS Markit, in a release.
“Also, firms seem to have adopted a wait-and-see approach on their plans until public policies become clearer upon the formation of a government.”
Voting in India’s multi-stage election began on April 11 and will end on May 19. Votes will be counted on May 23.
A sub-index measuring new orders slipped to 52.9 in April from March’s 54.2, the lowest since August, due to a weaker expansion in domestic demand. That had a spillover effect on hiring, which barely increased.
The rate of increase in input costs was its weakest since September 2015 and output prices grew at a slow pace, suggesting overall inflation will remain below the Reserve Bank of India’s medium-term target of 4 percent.
“With price pressures in the manufacturing economy cooling and growth losing momentum, it’s increasingly likely that the RBI may cut its official rate for a third successive time in June,” De Lima said.
