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India’s manufacturing sector activities gained further strength in November, and witnessed the strongest increase in production and sales since February on improving market conditions, a monthly survey said on Wednesday.

Purchasing Managers’ Index or PMI is an economic indicator that is derived after monthly surveys of different companies. It helps in determining whether the market conditions are expanding, contracting or staying the same, as per the view of the managers. 

A PMI number greater than 50 indicates expansion in business activity. A number less than 50 shows contraction. 

The seasonally adjusted IHS Markit India Manufacturing Purchasing Managers’ Index (PMI), increased from 55.9 in October to 57.6 in November, signalling the strongest improvement in the health of the sector in ten months. Moreover, the headline figure was well above its long-run average of 53.6.

The October PMI data pointed to an improvement in overall operating conditions for the fifth straight month. In PMI parlance, a print above 50 means expansion, while a score below 50 denotes contraction.

The November data pointed towards tentative signs of an improvement in hiring activity, following three successive months of job shedding.

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“The Indian manufacturing industry continued to expand in November, with growth gathering pace and forward-looking indices generally pointing to further improvements in the months to come,” Pollyanna De Lima, Economics Associate Director at IHS Markit, said.

“For now, companies are absorbing most of the additional cost burdens and lifting output charges only moderately. Should raw material scarcity and shipping issues continue to feed through to purchasing prices, substantial increases in output charges could be seen, and demand resilience would be tested,” the report said.

On the price front, the cost inflationary pressures remain elevated. The rate of purchase price inflation was little changed from October’s recent high. This was because of the raw material supply-demand mismatches and rising transportation costs.

“Businesses were indeed worried that inflationary pressures could hamper demand and production in the year ahead, as signalled by confidence weakening to the lowest in almost a year-and-a-half,” Lima said.

The Indian economy remained on track to post the fastest growth among major economies this year as its GDP expanded by a better-than-expected 8.4 per cent in the July-September quarter to cross pre-pandemic levels. 

The latest PMI data was based on survey responses, collected between November 12 and 24, from purchasing managers at around 400 of India’s manufacturing sector firms.

Lima, however, noted that the key threat to the outlook, in addition to potential new waves of COVID-19, is inflationary pressures.