Private sector output growth at 3-year high

In a significant uptrend, private sector manufacturing and services activities surged to 37-month high in March on new business orders although job growth remained sluggish, a monthly survey showed on Wednesday. 

The Nikkei India Composite PMI Output Index, which maps both manufacturing and services sectors, climbed from 51.2 in February to 37-month high of 54.3 last month. A reading above 50 indicates expansion, while one below this level means contraction and the latest data may add to the clamour for RBI to keep the interest rates low.

The Nikkei Services Business Activity index rose from 51.4 in February to 54.3 in March, matching its 19-month high level seen in January. Growth of manufacturing production also gained strength, therefore contributing to a marked expansion in the private sector output. “March PMI surveys signalled a reassuringly robust end to the financial year for the Indian economy, with sharper increases in new business spurring activity growth in both the manufacturing and service sectors,” said Pollyanna De Lima, economist at Markit, which compiles the survey. The survey noted that despite solid upturns in new business and output, the trend in employment remained subdued. “One disappointment, however, is the trend in employment, which showed little change through much of 2015-16,” Lima said, adding that barring mild increase in hiring seen among service providers during July, it was a broadly stagnant labour market for the past two years.

Going forward, Indian services companies remain optimistic that activity will increase further over the coming 12 months. On prices, Lima said input costs across the private sector rose at the quickest rate in three months and charge inflation likewise accelerated, suggesting headline inflation may pickup in coming months.