Manufacturing PMI (Apr.) - Capital Economics
India Economics

Manufacturing PMI (Apr.)

India Data Response
Written by Shilan Shah

India’s manufacturing PMI held up well in April, reflecting the fact that the containment measures in response to the surge in COVID-19 cases have been very light touch compared to last year. But the severity of the outbreak means tougher and more wide-ranging measures are bound to be imposed before long. This, as well as the associated hit to incomes, threatens to derail the manufacturing recovery over the coming months.

Manufacturing PMI holds up, but headwinds are mounting

  • India’s manufacturing PMI held up well in April, reflecting the fact that the containment measures in response to the surge in COVID-19 cases have been very light touch compared to last year. But the severity of the outbreak means tougher and more wide-ranging measures are bound to be imposed before long. This, as well as the associated hit to incomes, threatens to derail the manufacturing recovery over the coming months.
  • India’s manufacturing PMI edged up from 55.4 in March to 55.5 in April. (See Chart 1.) This comes despite the massive virus outbreak, and reflects the fact that most restrictions have been focussed on services rather than the manufacturing or industrial sectors. (In contrast, the reading plummeted to an all-time low during last year’s lockdown.)
  • This is similar to the response of authorities in other countries that have faced second waves. As we noted in an Update last week, daily data show that electricity demand has remained relatively above “normal” levels throughout April. (The industrial sector typically accounts for 40% of electricity consumption). The breakdown shows a marginal drop in the new orders and output components, while new export orders and the employment components both edged up.
  • The strength of the PMI reading is a positive development, but the good news won’t last for long. Note that the surveys are conducted in the middle two weeks of the month. The April reading will therefore not have captured the very latest jump in infections – India became the first country in the world to report more than 400,000 cases in a single day on Saturday – and the further ramping up of containment measures. The three traditional manufacturing powerhouses of Maharashtra, Gujarat, and Tamil Nadu have all recently extended restrictions to at least until the middle of May.
  • There are other headwinds too. Shortages of oxygen cylinders in hospitals have forced authorities to redirect supplies away from some factories that are reliant on it. More broadly, the hit to incomes as a result of tighter restrictions, as well as voluntary social distancing, is likely to weigh heavily on demand.

Chart 1: Manufacturing PMI

Source: IHS/Markit


Shilan Shah, Senior India Economist, shilan.shah@capitaleconomics.com