Manufacturing activity in India

India (INDA) aims to become the fifth-largest manufacturing nation globally (ACWI) (VT) by 2020. Prime Minister Modi’s “Make in India” initiative is intended to position India (PIN) as a global manufacturing hub. Manufacturing activity in India has gained momentum in 2017, with growth in the last four consecutive months.

However, manufacturing activity slowed in May 2017 compared to April 2017, mainly due to reduced demand. Let’s look at the manufacturing activity over the last year in the chart below.

India’s Manufacturing Activity in May 2017

Factory orders increase at a slower pace

The Nikkei Manufacturing PMI in India dropped to 51.6 in May 2017 compared to 52.5 in April 2017. Manufacturing activity experienced the weakest expansion since February 2017 as output saw its slowest growth in the last three months.

New orders also increased slowly compared to the previous month, including new export orders slowing for the first time in the last four months.

Employment and input costs

Employment declined in May 2017 compared with the improvement in purchasing activity, which saw its largest increase in May over the last three months.

The country’s input costs grew at a slower pace. However, the producer prices increased at a faster pace in May compared to April 2017.

Outlook and its impact

Goods producers were more optimistic in May 2017 as companies expect new product launches, machinery acquisitions, and marketing campaigns to support production growth. Investors can expect India’s manufacturing activity to improve in 2017, considering that business optimism reached a six-month peak in May 2017.

The iShares India 50 ETF (INDY), tracking 50 of the largest Indian equities, has gained about 22% this year through June 9, 2017.

In our next article, we’ll look at Brazil’s manufacturing activity in May 2017.

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