In September, India’s factory growth fell to a three-month low due to moderate demand and output, despite strong business confidence and easing inflationary pressures. In September, the Manufacturing Purchasing Managers’ Index (PMI) compiled by S&P Global dropped to 55.1 from 56.2 in August. However, the pace of growth remained solid and was above the 50-mark, separating growth from contraction for a 15th straight month.

As per S&P Global Market Intelligence, the Indian manufacturing industry remains in good shape, despite considerable global headwinds and recession fears elsewhere. There were softer but substantial gains in new orders and production in September.

Moreover, input costs increased at the slowest pace since October 2020, and most companies reported no change in purchasing prices. However, another report showed inflation wouldn’t decline to within the Reserve Bank of India’s (RBI) target band of 2-6 per cent until the first quarter of next year. Consumer price inflation accelerated to 7.00 per cent in August, driven by a rise in food prices and snapping a three-month downward trend.

Notably, the RBI has been selling dollars to stem the currency depreciation and increased rates by 190 basis points since May, including Friday’s 50 basis points hike. However, it has not been very successful in arresting the drop.
Forex exchange reserves are being depleted and dropping to USD 523 billion by the end of this year from a high of USD 642 billion in October 2021.