Indicating an upswing in factory activity, the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) posted a four-month high of 51.8 in July.
It was marginally lower at 51.7 in June.
“The performance of India’s manufacturing economy continued to improve in July, with a stronger expansion in new business contributing to faster increases in output and buying levels,” Nikkei said in a release on Monday.
A reading above 50 on the index denotes expansion while a reading less than 50 reflects contraction.
“…businesses refrained from creating jobs. The ongoing muted trend for employment indicates that companies remain somewhat uncertain regarding the sustainability of the upturn,” said Pollyanna de Lima, Economist at Markit and author of the report, adding that demand for plant and machinery improved but investment goods output dropped.
The data come just ahead of the monetary policy review of the Reserve Bank of India on August 9 and industry is hoping for a further reduction in key rates.
Hopes of rate cut “With inflation rates remaining lower than their respective long-run averages, it wouldn’t be surprising to see the RBI loosening monetary policy at its August meeting in an effort to encourage investment,” de Lima said.
In its policy review meet in June, RBI Governor Raghuram Rajan had left interest rates untouched.
Meanwhile, according to the survey, strong growth in new business orders, which boosted production, contributed largely to the uptick in manufacturing PMI.
The overall increase in output was led by consumer goods producers, followed by some growth in the intermediate goods category.
Significantly, new export orders climbed to a six-month high, with increases in the sectors of both consumer and capital goods.
Input costs also rose at the slowest pace in five months. “Although charge inflation accelerated, the rate of increase was only slight and remained below its long-run average,” said the release.
However, hiring trends remained relatively muted and only one per cent of the surveyed companies took on additional workers in July.
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