Ira Singh
Khabar Khabaron Ki,03 July’24
India’s manufacturing sector experienced a significant rebound last month, fueled by robust demand that led to a significant increase in output. This rally marked the fastest rate of hiring in over 19 years, showcasing the sector’s positive momentum despite ongoing inflationary pressures. Besides, companies across various manufacturing sub-sectors reported higher order volumes, prompting them to boost production capacities and workforce numbers to meet the growing demand. This surge in hiring reflects a renewed confidence in the sector’s growth prospects and its ability to navigate through economic challenges.
According to recent report compiled by S&P Global,the HSBC final India Manufacturing Purchasing Managers’ Index (PMI), rose to 58.3 in June, slightly below the preliminary estimate of 58.5, but up from 57.5 in May.
Inflation, a persistent issue, continues to exert pressure on the economy. However, a silver lining has emerged in the form of falling prices for Chinese exports. The reduction in costs for these imports has contributed to a decrease in inflationary pressures within India, offering some relief to manufacturers and consumers alike.
According to the recent, Annual economic report 2024 published by the Bank for International Settlements (BIS), China’s export drive has acted as a global disinflationary force for importing countries, with India being among the biggest beneficiaries.
Disinflation in China led to lower prices of Chinese goods in 2023, and along with a lower exchange rate, this reduced the prices of Chinese exports. As a result, imports from China have contributed to inflation coming down in many countries, stated report. Looking at individual countries, the effect was stronger where Chinese exports made up a larger share, such as in Australia, Brazil and India.For 2023-24, China accounted for 15 percent of total Indian imports.
India benefits even more, because it is a commodity importer and lower growth in China has kept a lid on global commodity prices. Through falling prices for its exports, as well as the impact of weaker domestic demand on commodity prices, developments in China are estimated to have reduced the annual rate of import price increases in other major economies by around 5 percentage points over 2023, on average, stated report.
India has also been relatively insulated from the slowdown in China compared to many other countries in Asia. Sluggish Chinese demand doesn’t affect it much, as China accounted for a relatively small proportion of Indian exports—3.8 percent in 2023-24, according to information.Besides, India is also a beneficiary of the reconfiguration of supply chains away from China.
The interplay between strong domestic demand and the moderation of input costs from abroad paints a complex but hopeful picture for India’s manufacturing sector. As companies continue to expand their workforce and output, the sector appears well-positioned to sustain its growth trajectory, provided that inflation remains under control and global supply chain dynamics remain favorable.
This development not only highlights the sector’s recovery but also underscores the importance of maintaining a balanced approach to managing demand, supply, and inflation to ensure sustained economic growth.