India’s manufacturing sector growth lost its momentum in November after the government’s surprise move to demonetize high-value banknotes. The seasonally adjusted Nikkei India Manufacturing Purchasing Manger’s Index (PMI) - a composite single-figure indicator of manufacturing performance - was down to 52.3 in November from 54.4 in October. This latest reading is the biggest month-to-month decline since March 2013.
As per the report, most of the companies showed softer increase in order books, buying levels and output with inflation rates for both output charges and purchase costs eased since October. The upturn in new export orders also lost some momentum in November. Further, the survey panellists reported higher demand from domestic as well as external clients, but indicated that growth was hampered by the money crisis. Meanwhile, outstanding business increased for the sixth month running. The rate of backlog depletion was, however, modest and the weakest since June.
Even if companies continued to increase their quantities of purchases, the pace of growth slowed from October’s 14-month high. Respondents have listed money issues as the main reason for the weaker growth in input buying. Higher prices paid for a range of raw materials resulted in a further overall increase in input costs. Sector wise, the weakest performer on this front was consumer goods. As per the report, a reading above 50 in terms of manufacturing performance indicates expansion, while anything below it means contraction.