India’s factory activities have continued to rally, supported by increasing demand amid easing price pressure. So far, India’s factory activity is at an eight-month high, its best performance in recent times.
A new private survey has shown that the Indian economy has remained resolute despite challenges confronting it, including massive capital outflows, increasing interest rate hikes, a slowing global economy, and a weakening rupee that has performed poorly compared to other countries.
More so, a private survey showed that India’s factory activity expanded quickly in July, driven by solid growth in new orders and output as demand continued to improve due to easing price pressures. The recent manufacturing PMI saw India’s PMI rally to 56.4, a significant uptick from June’s 53.9.
The report suggests that new orders and output skyrocketed at an incredible pace, a move not seen since November last year. On the other hand, input and output prices have remained consistent within the last eight months, further boosting demand.
According to Pollyanna De Lime, an astute economic associate, “the Indian manufacturing industry has benefited from a combination of faster economic growth and softening inflation.” This has contributed to the recent performance in the manufacturing sectors.
Reserve Bank of India’s stance on interest rate hikes
Like other countries, the Reserve Bank of India has continued to increase interest rates to manage inflation and other issues bedeviling its economy. In May 2022, the RBI increased the interest rate to 90 basis points, and analysts expect the RBI to raise rates further this week.
Meanwhile, the IMF has adjusted India’s growth forecast. The financial watchdog previously pegged India’s growth rate to 7.4% but has now adjusted that to 6.1% for this year. Next year’s growth forecast was also adjusted from 8.2% to 6.9%
Despite the modest performance in India’s manufacturing industry, there are still general concerns about India’s dwindling economy. The rupee has been on the back foot for some time now, trailing most currencies, including the dollar, in performance. It remains to be seen how the entire economy will perform in the next couple of months and whether the relevant government agencies are taking action to protect the economy.