(ATF) MUMBAI: India’s lockdown to contain the coronavirus has hit manufacturing with the country registering its worst-ever plunge in production, as orders dried up and companies laid off workers, IHS Markit said in a statement.
The Purchasing Managers Index (PMI) for manufacturing in India plunged to 27.4 in April from 51.8 in March.
“Input costs and output prices were lowered markedly as suppliers and manufacturers themselves offered discounts in an attempt to secure orders,” IHS said in a statement.
“Lower cost burdens gave manufacturers room to decrease their output prices at the start of the second quarter. The marked decline was the quickest since data collection began over 15 years ago.”
India imposed a countrywide lockdown late on March 24 to contain the coronavirus pandemic from spreading. Over the weekend, the Modi government extended the lockdown till May 17 for most parts of the country which usually enjoy vibrant economic activity.
“The contraction in manufacturing PMI is in line with the fall in Asian peers,” Rahul Bajoria, an analyst with Barclays Capital said in a note. “While a large share of the consumption basket was exempted under lockdown, we believe a revival in demand is unlikely to materialize in the near-term.”
Yet, IHS recorded a better sentiment regarding the 12-month outlook for production from March’s recent low on hopes that demand will rebound once the Covid-19 threat has diminished and lockdown restrictions eased.
The lockdown has taken a toll on economic activity, with core industrial production down by 6% year-on-year, electricity consumption down by 22% in April and freight traffic contracting by more than 32% on year, government data release last week showed.
“We maintain our forecast that the RBI will reduce the repo rate by another 90 basis points by the August policy meeting,” wrote Bajoria. “More importantly, the government will also do some heavy lifting, with decisive support to affected sectors.
The IHS Markit India Manufacturing PMI is compiled by IHS Markit from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers.