Ahead of the monetary policy review on Tuesday, a private survey on Monday indicated that manufacturing activities slowed marginally in September and created a case for a reduction in interest rates.

The Nikkei India Manufacturing Purchasing Managers’ Index (PMI) — grew for the ninth consecutive month — but the rate of growth eased to 52.1 in September as against 52.6 in August.

A reading above 50 on the index denotes expansion while one less than 50 indicates contraction.

“India’s manufacturing upturn was sustained in September, as a further increase in order books underpinned growth of output and purchasing activity. That said, rates of expansion eased in all cases,” said the release.

One factor contributing to the slowdown in the sector was a softer increase in new business inflows but external demand was strong and new export orders rose at the fastest pace since July 2015.

Higher production was seen across sectors and was led by a sharp rise in manufacturing of consumer goods sectors.

“Although inflation rates edged higher, these remain weak by historical standards and indicate that we may still see the RBI loosening monetary policy in 2016,” said Pollyanna de Lima, Economist at IHS Markit and author of the report.

But de Lima added that manufacturing may have delivered a stronger contribution to the growth in gross domestic product in the second quarter of the fiscal with the quarterly reading for the PMI’s Output Index up from 51.4 during April-June to 53.6.

Rising inflationary pressures But the data also revealed an intensification of inflationary pressures and both input costs and output charges increased at faster rates.

“The main item reported to be up in price was steel,” noted the report adding that the average purchase costs rose at a faster pace in September, but it was weak compared to its long-run trend.

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