India's manufacturing sector witnesses strong growth rates in July

India’s manufacturing sector activities have reported the strongest rate of growth in three months in July. According to a monthly survey, the country has managed to achieve growth as the lockdown restrictions began to ease and demands showed improvement.

The Purchasing Managers’ Index (PMI) by IHS Markit India Manufacturing has witnessed a rise from 48.1 in June to 55.3 in July, delivering the strongest rate of growth in three months. The index above 50 means expansion while a score below 50 denotes contraction.

Pollyanna De Lima, economics associate director at IHS Markit said that it is encouraging to see the Indian manufacturing industry recover from the blip seen in June. Lima pointed out that the output rose at a robust pace, with over one-third of companies noting a monthly expansion in production.

“Should the pandemic continue to recede, we expect a 9.7% annual increase in industrial production for the calendar year 2021,” Lima further noted.

July also saw a marginal increase in job creation, ending a 15-month sequence of job shedding.

“Policymakers will welcome evidence that inflationary pressures are starting to abate. Firms signaled the slowest increases in input costs and output charges for seven months. Hence, we expect the RBI to keep interest rates unchanged in its August meeting as it continues to support growth,” Lima added.

RBI’s stance

The RBI is scheduled to announce its bi-monthly monetary policy review of its Monetary Policy Committee (MPC) on August 6.

The Reserve Bank is likely to maintain the status quo on the interest rate and watch the developing macroeconomic situation for some more time before taking any decisive action on monetary policy.