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November 30, 2023

As demand declines, India’s industrial growth in September decreased to a 3-month low- PMI

Despite easing inflationary pressures and high business confidence, India’s industrial growth declined to a three-month low in September as a result of a decrease in demand and output, according to a private survey.

S&P Global’s Manufacturing Purchasing Managers’ Index decreased from 56.2 in August to 55.1 in September, falling short of the 55.8 economists polled by Reuters had forecast. However, the rate of growth was remained strong and was above the 50-point threshold that separates growth from contraction for the fifteenth consecutive month.

Despite significant global headwinds and recession worries elsewhere, the Indian manufacturing sector is still doing well, according to Pollyanna De Lima, associate director of economics at S&P Global Market Intelligence.

“New orders and production increased more slowly but significantly in September, and certain leading signs indicate that output is likely to improve going forward, at least in the near term.”

Most companies reported no change in purchasing prices, and input costs increased at their slowest rate since October 2020.
However, a different Reuters poll indicated that the Reserve Bank of India’s (RBI) goal range of 2-6% would not be reached until the first quarter of the following year. Due to a spike in food costs, consumer price inflation surged to 7.00% in August, breaking a three-month downward trend.

Future output expectations are at their highest point in seven and a half years, while global demand is at its peak since May, driven by strong foreign demand for commodities amid a depreciating Indian rupee.

In October, confidence can be dashed by currency worries and the effects of a falling rupee on interest rates and inflation, according to De Lima.
The RBI has increased interest rates by 190 basis points since May, including a 50-basis point increase on Friday, and has been selling dollars to try to stop the collapse in the value of the currency, but it has not been very successful.

But from a peak of $642 billion in October 2021, it was predicted that foreign reserves would be exhausted and decrease to $523 billion by the end of this year.

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