An Indian factory worker in a file photo. Image: Twitter

India’s manufacturing sector faltered in November after showing signs of recovery following the easing of Covid-19 restrictions, according to the monthly Nikkei Manufacturing Purchasing Managers’ Index, compiled by IHS Markit.

The seasonally adjusted IHS Markit India Manufacturing Purchasing Managers’ Index fell to a three-month low of 56.3 in November, amid slower increases in factory orders, exports and buying levels. However, the survey also indicated that the manufacturing sector growth remained strong, despite losing traction.

India had hit a decade-high of 58.9 in October and IHS Markit director Pollyanna De Lima observed that November’s softening of rates of expansion does not represent a major setback. But she cautioned that a spike in coronavirus cases and the possibility of fresh lockdowns could undermine recovery. “The Indian manufacturing sector remained on the right path to recovery, with strong growth of new orders and output sustained during November,” De Lima added.

The companies surveyed said the pandemic was the key factor weighing on growth during November. With India’s Covid-19 caseload close to 9.5 million and many cities witnessing fresh waves of infections, some local governments have brought back night curfews. Hence, companies are now feeling uncertain about the future and this has affected business confidence.

Unemployment

Unemployment remains an area of concern as millions have already lost their jobs or suffered pay cuts since the pandemic started and manufacturing firms reduced their headcount for the eighth month in a row – for the first time since the survey began in March 2005. Companies also had to restrict their headcounts to comply with social distancing guidelines laid down by the government.

IHS Markit compiles the manufacturing index based on the responses to questionnaires it sends to purchasing managers for a panel of about 400 manufacturers. The panel is classified on the basis of sector, workforce size and contributions to GDP. A score above 50 means expansion, while below that denotes contraction.

India is facing its first technical recession following an economic contraction for the second consecutive quarter. In the latest quarter the gross domestic product contracted 7.5%, while in the previous quarter it had shrunk a record 23.9%. The two-month long lockdown from March 25 had taken a heavy toll in the previous quarter and almost all rating agencies concede that the country will face an annual contraction.