India’s factory activity falls for the first time in a year

India’s factory activity dropped for the first time in almost a year in June. Restrictions to contain the deadly second wave of the COVID-19 triggered slumps in demand and output. Remarkably, that pushed companies to cut more jobs.

As we know, many Indian states have recently relaxed some containment measures following a fall in daily cases. However, the rapid emergence of the new Delta Plus variant has raised concerns over the country’s already weak economic outlook.

The Nikkei Manufacturing Purchasing Managers’ Index, compiled by IHS Markit, sank to an 11-month low of 48.1 in June. It is moving below the 50-level separating growth from contraction.

According to Pollyanna De Lima, economics associate director at IHS Markit, the intensification of the coronavirus crisis in India had a detrimental impact on the manufacturing economy.

Lima announced that capital goods was the worst-affected area in June. She also added that output here declined at a steep rate due to a sharp slump in sales.

Overall demand and output contracted in June for the first time in 11 months. Meanwhile, manufacturing firms extended their record job-cutting spree.

The survey, conducted before Finance Minister Nirmala Sitharaman’s announcement of additional fiscal support on Monday, also showed optimism about the year ahead sank to its lowest since July 2020.

India’s June unemployment rate dropped to 9.17%

Despite a sustained increase in input costs, companies boosted output prices at a slower rate last month to attract demand.

However, that may not be enough to significantly soften a rise in overall inflation. Notably, it hit a six-month high in May. A jump in input costs due to a strong increase in energy and commodity prices pushed wholesale price inflation to its strongest in 15 years.

Still, the Reserve Bank of India was not anticipated to hike its key interest rates anytime soon. Remarkably, it in April cut its growth forecast for this fiscal year to 9.5% from 10.5% . The primary focus remains on increasing economic growth.

According to data from the Centre for Monitoring Indian Economy (CMIE), India’s June unemployment rate dropped to 9.17% from the May figure of 11.90%.

Most economic activities have continued in the south Asian nation after state governments eased pandemic curbs following a decline in coronavirus infections, which peaked in May.