Indicating a broad stagnation in manufacturing operating conditions in India, slowdown in factory activity deepened in July as order books shrank by the most in over four years. The HSBC Manufacturing Purchasing Managers’ Index (PMI), compiled by Markit, edged down to 50.1 in July from 50.3 in June. However, the index, which gauges business activity in Indian factories but not its utilities, has been running close to the 50 mark that separates growth from contraction since May and has held above it for over four years now.
Meanwhile, output fell for the third consecutive month in July, amid evidence of falling new orders, tough economic conditions and raw material shortages. The rate of decline, however, was fractional and eased since June.
Lackluster demand conditions had resulted in a further contraction of incoming new work, with sector data highlighting declines in the intermediate and investment goods sectors. The new orders sub-index, an overall indicator of firms' order books, fell to 49.5 in July from 49.7 in June, as growth in export orders, while still positive, slowed sharply in July. New export orders rose during July, taking the current expansionary sequence to 11 months.
July data highlighted a further expansion of employment levels in the Indian manufacturing sector. However, the rate of job creation remained slow. Payroll numbers rose in the consumer goods sector, while stagnated at intermediate goods producers and fell at investment goods firms.
On the price front, inflationary pressures persisted in July, while output prices rose at the fastest rate since February, as firms attempted to pass on increased cost burdens, the overall input prices rose sharply in July, and at the strongest rate in ten months.
The current data suggests that the RBI will likely have to keep policy rates on hold for a while given lingering inflation risks and the recently introduced currency stabilization measures may not be lifted anytime soon. India’s apex bank, in a bid to curb Rupee’s slide, kept rates on hold in July monetary policy, besides measures including capping allocation of funds under LAF for each individual bank to 0.50% of its own NDTL, increasing marginal standing facility (MSF) rate and bank rate by 200 bps each to 10.25% and mopping up some liquidity through open market operations (OMO) sales and stipulating banks to maintain a minimum daily CRR balance of 99% of the average fortnightly requirement.
MoneyWorks4Me is a SEBI-registered Investment Adviser (IA) dedicated to helping investors build long-term wealth through transparent, research-driven, conflict-free guidance. Founded in 2008, we started our journey as a Research Analyst (RA), providing deep fundamental analysis, intrinsic value insights, and long-term investing frameworks for Indian equities. In 2017, we transitioned to a full-fledged SEBI-registered Investment Adviser, strengthening our commitment to acting as a fiduciary—always putting the investor’s interest first.
To become India’s most trusted, research-powered fiduciary advisory platform—where every investor, regardless of experience, can make calm, confident, and well-reasoned investment decisions.
MoneyWorks4Me ensures this through: