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Activity at Indian factory declines for first time in 11 months amid COVID-19 crisis

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BENGALURU (Reuters) – Activity at Indian factories contracted for the first time in nearly a year in June, as restrictions aimed at containing the deadly second wave of the coronavirus triggered a drop in demand and demand. production that has prompted companies to cut more jobs, a private investigation revealed Thursday.

A worker wearing a protective mask cleans a machine inside an underwear factory after it reopens after a multi-week shutdown to slow the spread of coronavirus disease (COVID-19), in Kolkata, India , April 20, 2020. REUTERS / Rupak De Chowdhuri / Files

Although many Indian states have recently relaxed some containment measures following a decrease in daily cases, the rapid emergence of the new Delta Plus variant has raised concerns about the country’s already weak economic outlook.

The Nikkei Manufacturing Purchasing Managers Index, compiled by IHS Markit, fell to an 11-month low of 48.1 in June from 50.8 in May, falling below the 50 level between growth and contraction.

“The intensifying COVID-19 crisis in India has had a negative impact on the manufacturing economy,” said Pollyanna De Lima, associate director of economics at IHS Markit.

“Of the three major areas of the manufacturing sector monitored by the survey, capital goods were the area most affected in June. Production here has declined at a rapid rate due to a sharp drop in sales. “

As aggregate demand and output fell in June for the first time in 11 months, manufacturing companies extended their record wave of job cuts, albeit at a slower pace.

The survey, conducted ahead of Finance Minister Nirmala Sitharaman’s announcement on Monday of additional budget support, also showed optimism about the coming year had fallen to its lowest since July 2020.

“Businesses have become increasingly concerned about the end of the pandemic, which has led to downward revisions to production growth projections. Due to moderate optimism, jobs were cut again in June, ”De Lima said.

Despite a sustained rise in input costs, companies raised product prices at a slower pace last month to attract demand.

However, that may not be enough to significantly dampen a surge in headline inflation, which peaked in six months in May. Rising input costs due to a sharp rise in energy and raw material prices pushed wholesale price inflation to its highest level in at least 15 years.

Nevertheless, the Reserve Bank of India, which in April lowered its growth forecast for this year to 9.5% from 10.5%, is not expected to raise its key interest rates anytime soon, as the main objective remains. stimulate economic growth. [ECILT/IN]

Reporting by Indradip Ghosh; Editing by Shri Navaratnam

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