India’s manufacturing sector feels the tremors

India is feeling not just he tremors from the recent terrorist attacks but also from its industrialised sectors. The financial gurus have lowered the country’s growth rate to a believable 7 percent from the earlier forecasts of double digit growth.  But what we fail to maybe comprehend is that the developed nations after a point will not make double digit growth forecast because that have been through the cycle of development and indsutrilisation.  We in India are on Phase 1 of development and sustained growth.

But the other point in focus is that the western countries today are grapping with a huge market turnaround. Maybe we are at par or little ahead, since we have fashioned or selves as a service economy. There is little doubt that the power axis is shifting to the Asian countries. Citing examples would be China, who has modeled itself as a manufacturing economy. Today, world over the markets are flooded with Made in China goodies.  Even big fashion houses and manufacturing companies have a back end manufacturing hub in China. Another fine example is Singapore. The country has shaped itself as a Knowledge Economy. Today, the offers and education programmes offered by this small country are fast catching up the ones offered by the US and UK universities.

In the mist of all this is the latest data from ABN AMRO, which indicates that India’s manufacturing sector suffered its first contraction in the history of its survey during November, with levels of production and incoming new orders both down sharply. A significant reversal in the strength of the domestic market was the principal factor underlying the weaker performance of manufacturing, as tighter credit conditions and the onset of the global economic downturn hit confidence and reduced clients’ willingness to commit to new spending.

The headline ABN AMRO Purchasing Managers’ Index (PMI) – a seasonally adjusted index designed to gauge underlying sector conditions – plunged to a record low of 45.8.

This is the first occasion in the history of the survey that the PMI has fallen below the neutral 50.0 mark.

November data was consistent with a broad slump of the manufacturing sector, with all except one of the indexes covered by the report falling to series record lows and posting levels well below peaks seen during mid-year (the exception being suppliers’ delivery times). On the prices front, the latest data signalled that average input costs and output prices had fallen for the first time in their respective series histories in November.

The decline in both of these variables was mainly driven by the current weak market conditions and lower commodity prices. There were also some reports of firms lowering their average charges in response to increased competition. November data provided further evidence that capacity pressures were easing in the manufacturing sector.


Source : Financial Express