new Delhi: According to a Reuters report, rising prices of commodities and global crude oil have caused India’s manufacturing activity to contract in March.
A recent survey showed factory activity grew at a slower pace in March and output grew at the weakest rate since September, and optimism remained at a two-year low.
The survey compiled by S&P Global states that India’s economy is slowing down.
In the report, the news agency said the rise in oil prices, mainly due to the ongoing Russo-Ukraine war, has already taken a toll on consumer spending, the biggest contributor to GDP growth. .
The Manufacturing Purchasing Managers’ Index (PMI) declined to 54.0 in March from 54.9 in February. However, it remained above the 50-level separating growth from contraction for nine consecutive months. Despite that decline, the sector had its best annual financial year performance since FY 2011-12.
India, like other major world economies, has been witnessing a steady rise in inflation due to supply disruptions and rising crude oil rates, the largest component of the country’s imports.
India is majorly dependent on imports to meet its oil requirements with 85 per cent of its oil imports. Retail rates are subject to change in line with the fluctuations in global prices.
Citing S&P Global’s associate director of economics, Polyana de Lima, Reuters noted, “Manufacturing sector growth in India weakened at the end of fiscal 2011-22, with companies reporting soft expansion in new orders and production . The slowdown was accompanied by increased inflationary pressures, although the rate of increase in input costs remained below the rate seen at the end of 2021.
According to the report, the sub-index tracking new orders and output was at a six-month low and overseas demand contracted for the first time since June 2021, highlighting a weak global economic recovery and a slowdown in China.
The number of employees in factories has increased for the first time in four months. However, rising cost pressures remained one of the main concerns as companies faced sharp rise in input prices last month, forcing them to transfer some of the burden to consumers. Production prices rose at the fastest rate in five months.
De Lima said, “For now, demand has been strong enough to withstand price increases, but should inflationary momentum continue, we could see a further slowdown if not an outright contraction in sales.” ,” while “the companies themselves are very visible” worried about price pressure, which was a key factor driving business confidence to a two-year low.