Challenges of slowing growth and persistent inflation
Latest data, point to a palpable softening in economic momentum.
The official Index of Eight Core Industries and S&P Global’s Purchasing Managers’ Index (PMI) for the manufacturing sector for October, Lights the data.
Output across the key infrastructure industries, from cement, coal, steel and electricity, show the average growth in production eased appreciably to a four-month low of 8.1% in September, from the 12.5% pace posted in August.
Only fertilizers registering a quickening in growth from the preceding month as farmers stocked up on the key agricultural input ahead of the rabi season.
This year southwest monsoon season resulted in 13% surplus precipitation for September, also likely contributed to dampening demand and output for cement, electricity and steel.
All the eight sectors, with the overall index declining 4.8% from August’s level.
Coal offered the silver lining the year-on-year growth in output of the fuel eased only slightly to a still robust 16.1% pace, from August’s 17.9%, and posted just a 1.5% sequential contraction.
PMI data for October buttresses concerns that broader economic momentum may yet again be sliding for want of traction.
PMI signalled sectoral growth slid to an eight-month low last month, amid a weakening in demand, particularly for consumer goods.
More worrying is the fact that less than 4% of the about 400 companies surveyed said they were adding staff, thus depressing job creation in manufacturing to the slowest level since April.
Input cost inflation also accelerated.
Producers were forced to temper the pass-through of higher costs.
Panellists cited rising inflation expectations as the key factor expected to dent demand and production growth over the next 12 months.
The advance estimates for lower kharif output, disconcertingly flag the fact that the farm sector may be able to offer little succour as rural incomes get hit.
Policymakers have their task cut out to surmount the twin challenges of slowing growth and persistent inflation.
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