India’s production capacity falls in November as COVID-19 fear resurfaces

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India’s manufacturing recovery stumbled in November as COVID-19 fear took a toll on demand and output, thus prompting the firms to cut jobs for the eighth month in a row, a survey confirmed.

India’s economy which stands as Asia’s third-largest and the second most adversely affected due to COVID-19 dropped 7.5 percent in the July-September quarter in comparison to the recorded contraction of 23.9 percent in the previous quarter. This comes as a hope of recovery amidst the economic backlash due to COVID-19. 

On the other hand, Nikkei Manufacturing Purchasing Managers’ Index, which was compiled by IHS Markit, slumped from October’s more than a decade high of 58.9 to 56.3 in November. Yet, it managed to maintain the above 50-level mark recording growth for the fourth consecutive month. Sub indexes tracking overall demand and output recorded robust growth but weakest expansion rates in three months.

“Although the softening of rates of expansion seen in the latest month does not represent a major setback, since these are down from over decade highs in October, a spike in COVID-19 cases and the possibility of associated restrictions could undermine the recovery,” stated Pollyanna De Lima, economics associate director at IHS Markit.

“Companies noted that the pandemic was the key factor weighing on growth during November, with COVID-19 related uncertainty also restricting business confidence,” she added.

The recent rise in COVID-19 casualties infections in some parts of the country has pushed the state government to reimpose restrictions on mobility which threatens the recovery.

Millions of people have already lost their jobs or suffered pay cuts since the COVID-19 pandemic hit the country and manufacturing firms have reduced headcount for the eighth month in a row now.

A strong rise in the input costs has forced the firms to increase the selling prices in the fastest way possible, thus indicating the possibility of the overall inflation remaining above RBI’s predicted medium-term target of 2-6 percent.

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