The Nikkei India Manufacturing Purchasing Managers’ Index stood at 51.2 in September, remaining unchanged from August.
“The reading was indicative of a modest improvement in manufacturing sector business conditions in September,” Nikkei said in a release on Tuesday, adding that it was however, below the long-run trend of 54.1.
Manufacturing PMI stood at above 50 for two successive months. A reading above 50 indicates expansion and one below 50 shows contraction in production.
In September, growth in the consumer and intermediate goods categories had offset a contraction in the investment goods sector.
The data comes as the Monetary Policy Committee will begin discussions on the bi-monthly policy review later today. An announcement on rates will be made on Wednesday.
Significantly, IHS Markit has also downgraded its real GDP growth for India to 6.8 per cent in 2017-18.
“September data painted an encouraging picture as the sector continued to recover from the disruptions caused by the introduction of the GST in July…The lingering effects of recent economic shocks continue to cast a shadow on economic growth,” said Aashna Dodhia, Economist at IHS Markit and author of the report.
Dodhia further said: “Business confidence strengthened among manufacturers as they reportedly anticipate long-term benefits from recent government policies. This was confirmed as the sector experienced meaningful gains in employment.”
On the back of more new work orders, Indian manufacturers raised their staffing levels at the fastest pace since October 2012.
On the prices front, the survey said that though cost pressure intensified during September, inflation remained weaker than the long-run trend. Strengthening of the Indian rupee may put a squeeze on efforts to revive demand for Indian goods from export markets.
“The lingering effects of recent economic shocks continue to cast a shadow on economic growth as IHS Markit downgrades its real GDP growth forecast to 6.8 per cent for fiscal year 2017-18,” Dodhia said, adding that “it will be interesting to see if India’s new economic advisory council will bolster its path to recovery“.
India’s economic growth slipped to a three-year low of 5.7 per cent during April-June, underscoring the disruptions caused by uncertainty related to the GST rollout amid slowdown in manufacturing activities.