Manufacturing PMI Drops in July Due to Slow Market and Taxation Changes

Manufacturing sector's output declined last month due to the launch of the Goods and Services Tax (GST) along with weak demand, a key macro-economic data showed.

The Nikkei India Manufacturing Purchasing Managers' Index (PMI), which is a composite indicator of manufacturing performance, stood at 47.9 in July from the index reading of 50.9 in June 2017.

An index reading of above 50 indicates an overall increase in economic activity, and below 50 an overall decrease.

As per the figures, the Nikkei India Manufacturing PMI was at its lowest mark in July since February 2009 and highlighted the first deterioration in business conditions in 2017 so far.

"Manufacturing growth in India came to a halt in July, with the PMI down to its lowest mark in almost eight-and-a-half years amid widespread reports that the sector has been adversely affected by the implementation of the goods and services tax,"said Pollyanna De Lima, economist at IHS Markit and the author of the report.

"The reductions in output, new orders and purchasing activity were all the steepest since early-2009. The downturn was broad-based across all subsectors covered by the survey, with output scaled back among firms in the consumer, intermediate and investment goods categories amid falling order books."