Manufacturing reached a ten-month low in May, huge job cuts in factories

The growth of the manufacturing sector was curbed by the escalation of the pandemic and difficulties in securing raw materials, the survey said.

To control Corona, the lockdown and restrictions imposed in different states of the country have slowed down the pace of manufacturing. Due to less work in factories, along with decreasing inventory, employment has also decreased. The manufacturing activities index PMI has come down from 55.5 in April to 50.8 in May. This is the lowest level in the last ten months.

Factories reduced production due to lack of demand

The second wave of corona infection has resulted in a significant drop in demand. Because of this companies have slowed down or stopped production. Car makers like Maruti, Mahindra & Mahindra, Tata and two-wheeler companies like Hero and TVS recently halted production at their factories for a few days. According to Poliana de Lima, economic associate director of PMI issuing agency IHS Markit, India’s manufacturing output grew by 6.9 per cent in the January-March quarter. GDP growth during this period was 1.6 percent. During the financial year ended March 2021, there was a decline of 7.3 percent in GDP. This is the biggest ever GDP decline in the history of the country.

Employment decreased due to second wave, after 11 months unemployment rate reached double digits in May 2021

A large number of workers were unemployed due to the decline in manufacturing

According to Lima, seeing the prospect of slowdown getting prolonged, companies have reduced buying raw materials for production. Due to the decline in production, jobs have also decreased. In the states where there is a lockdown, production in factories was almost closed in the past. Due to this, migrant laborers were not getting work along with the local people. As per IHS Markit’s assessment, at present, the situation is gloomy regarding the manufacturing environment ahead. This can have the biggest impact on employment. Due to the second wave of Corona, the unemployment rate rose to 11.9 percent in May 2021, compared to 7.97 percent in the previous month of April 2021.