India’s factory activity grew at its fastest in four months in April, buoying hopes that it will continue to be one of the fastest growing economies despite the global slowdown.
Results of a private survey on Monday showed strong growth in new orders and output, which point to healthy demand and an encouraging outlook, analysts say.
The Manufacturing Purchasing Managers’ Index compiled by S&P Global increased to 57.2 last month from March’s 56.4, remaining above the 50-mark separating growth from contraction for a 22nd month and confounding expectations in a Reuters poll for a fall to 55.8.
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Quick expansion in new orders
“Reflecting a robust and quicker expansion in new orders, production growth took another step forward in April,” Pollyanna De Lima, economics associate director at S&P Global Market Intelligence, said in a release accompanying the survey.
“Companies also benefited from relatively mild price pressures, better international sales and improving supply-chain conditions.
“It seems like Indian manufacturers have abundant opportunities to keep powering ahead. Besides seeing the strongest inflow of new work in 2023 so far, capacities were expanded through job creation, input buying was lifted.”
Both new orders and output grew at their fastest pace since December, and that helped firms resume hiring during April, following the first decline in 13 months in March.
Foreign demand also expanded at the fastest pace in four months in April and optimism improved.
“Manufacturers are certainly upbeat towards growth prospects, with optimism improving from March’s eight-month low on the back of contracts pending approval, rising client enquiries, marketing initiatives and evidence of demand resilience,” De Lima said.
The survey showed input costs rose at a faster pace in April, although improving demand meant firms were able to pass on some of that burden to customers, suggesting retail inflation is unlikely to slow significantly anytime soon.
Inflation was expected to average 5.3% this fiscal year and 5.0% next, remaining well above the Reserve Bank of India’s 4.0% medium-term target, a separate Reuters poll found.
KKR invests $250m more in Serentica Renewables
In related news, US private equity firm KKR & Co will invest an additional $250 million in Serentica Renewables, the Indian decarbonisation platform said on Monday.
“This latest investment will support the company’s effort to achieve 4,000 MW of installed renewable energy capacity that will aid clean energy delivery to large-scale industrial customers,” Serentica Renewables said in a statement.
KKR, which jointly holds Serentica with billionaire Anil Agarwal’s Twinstar Overseas Ltd, had in November committed to invest $400 million in the company.
Founded last year, Serentica focuses on industrial decarbonisation by making renewables the primary source of energy for the commercial and industrial sectors, that use more than 50% of the electricity generated in India.
India’s renewables sector has been attracting increasing foreign investment, and was among its top five industries for overseas funds in the last fiscal year, with a 5% share of all inflows from April to September 2022, compared with 3.3% in the same period a year ago.
- Reuters with additional editing by Jim Pollard
NOTE: Additional details (on KKR investment) was added to this report on May 1, 2023.
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