Data released by the data analytics firm IHS Markit showed purchasing managers’ index (PMI) for manufacturing declined slightly in July to 46 from 47.2 in June.
- A figure of above 50 indicates expansion, while a sub-50 print signals contraction.
- Indian Oil Corporation Ltd (IOC), the country’s largest fuel retailer on Friday said that its capacity utilization, which had increased to around 93% in the first week of July, has come down to 75% on account of many state governments imposing fresh lockdowns measures.
- The IMF has estimated Indian economy to contract by 4.5% in FY21, while Goldman Sachs expected the June quarter to be the worst, with GDP shrinking by 45% as business activity came to a standstill for at least two months due to stringent lockdown measures.
- ICRA Ltd earlier this month revised its GDP projection for India in FY21 to contraction of 9.5% from 5% estimated earlier citing unabated rise in covid-19 infections in the unlock phase and persisting labour supply mismatches affecting supply chains and consumption patterns.
- “Given the severity of the pandemic and the duration of the safety measures that need to be employed, we now expect a deeper pace of GDP contraction in Q2 FY21 relative to our earlier forecast.
- The timeline for a firmer recovery out of the contractionary phase is now being pushed ahead to at least Q4 FY21 from Q3 FY21,” it added.
- Subdued demand was evident in the latest PMI by marked decrease in new orders placed with manufacturers during July.
- Similar to the trend for output, the pace of decline accelerated from June, but remained slower than at the height of the current crisis.
- However, despite current operating conditions continuing to deteriorate, manufacturers were increasingly optimistic regarding future activity.
- Sentiment towards the 12-month business outlook improved for the second month in a row to reach a five-month high even though the degree of positivity was still well below the historical average.
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