Business conditions in India stagnated in October as manufacturing PMI drops, Nikkei says

Nikkei's Purchase Managers Index (PMI) published by IHS Markit dropped to 50.3 in October from 51.2 in September 2017. 

The report said that the downward movement in the headline index was partly driven by a stagnation in new business. Panellists linked subdued demand conditions to negative impacts of GST. Meanwhile, new export orders for Indian goods reduced in October. Moreover, the rate of contraction was the fastest since September 2013.

Aashna Dodhia, Economist at IHS Markit, “India’s manufacturing companies struggled somewhat as the recent recovery enjoyed by the sector lost impetus in October. Disappointingly, manufacturing production rose at the weakest pace in the current sequence of growth. Inflows of new orders stagnated as the negative effects arising from the implementation of GST continued to dampen demand levels."

The report further said that overseas demand for Indian goods dipped to the greatest extent since September 2013.

“On the bright side, the labour market continued to improve, with manufacturers further increasing their staffing levels, and at a pace similar to September’s 59-month high. Business confidence eased to the weakest since February as some firms expressed concerns over negative GST effects. However, those manufacturers that were optimistic forecasted benefits of GST materialising over the next 12 months," Dodhia said.  

The report highlighted that India's manufacturing sector growth lost momentum in October as output rose only fractionally and new orders stagnated. 

Encouragingly, firms added to their payroll numbers at a similar pace to September’s 59-month high in response to greater volumes of outstanding business, it said. 

On Tuesday, the World Bank published its Ease of Doing Business ranking and placed India at the 100th spot for the first time ever. India was placed 130 last year. 

Moreover, Index of Eight Core Industries that comprises of 40.27% of the weight of items included in India's Index of Industrial Production (IIP) rose 5.2% in September 2017 on an year-on-year basis.  Its cumulative growth during April to September, 2017-18 was 3.3%.