Make in India effect: Industry back on track

Mumbai: January saw the effect of the Make in India programme with industrial growth — as reflected in the Nikkei Manufacturing Purchasing Managers’ Index (PMI)  — shooting up to a four-month high.

The index stood at 51.1 in January, up from 49.1 in December which had seen a contraction in manufacturing for the first time in two years. An index below 50 is considered as contraction, while anything above 50 is growth.

Part of this December contraction was attributed to the Chennai floods which resulted in the shut down in several major companies as also to the festive season holidays. The manufacturing sector in January  got a boost from new orders according to the  monthly survey.

Pollyanna De Lima, economist at Markit and author of the report has been quoted saying “The opening month of 2016 saw a rebound in new business — from both domestic and external clients — leading manufacturers in India to scale up output following a short-lived downturn recorded in December”.

She said though the trends in the growth rates are relatively weak in comparison with the long-run series averages, January’s PMI data paints a brighter picture of the Indian economy.

The new export orders sub-index rose to 52.5 from 51.5, the highest reading in five months, which coupled with a similar increase in domestic orders suggest renewed demand for Indian goods both home and abroad.

That is good news for the RBI which cut rates four times last year, by a cumulative 125 basis points, to boost economic growth as inflation remained subdued. However, Ms Lima expected RBI to keep key policy rates unchanged  as retail inflation rates have been increasing.