The HSBC India Manufacturing Purchasing Managers' Index (PMI), a measure of factory production, eased to 52.4 in August from 53 in July, registering a moderation in manufacturing activity, though remaining "solid".
This is the 10th consecutive monthly improvement in operating conditions in August. A PMI reading above 50 indicates growth while a lower reading means contraction.
"Manufacturing activity moderated following a spurt in the previous month. Output and new orders slowed slightly in August, but remained robust relative to their 12-month history," HSBC Co-Head of Asian Economic Research Frederic Neumann said.
The slowdown during August looked to be domestically -driven since new export orders (54.5 as against 54.3 in July) registered a marginal rise.
"New export orders rose in August, extending the current sequence of growth to 11 months. Surveyed firms pointed to strengthening demand from key export clients as the main reason behind expansions in foreign business," HSBC said.
Details within the survey suggest that growth in August was driven mainly by consumer goods, whereas capital goods production suffered during the month.
Conversely, workforce numbers declined for a second successive month in August, albeit at a fractional rate, as the vast majority of survey respondents left recruitment levels unchanged.
On inflation, HSBC said that price pressures remained elevated despite the slight deceleration seen in input prices.
"This is likely to keep the central bank guarded against inflation risks, particularly from the pick-up in demand," Neumann said.
In the recent monetary policy review, RBI kept policy rate static at 8 per cent citing upside risks to inflation in view of uncertain monsoon and its impact on food production as also volatile international oil prices.
India factory activity expands at slower clip to 52.4 in August
(Reuters) Indian factory growth eased in August from July's 17-month record pace as new orders came in at a slower clip, a business survey showed on Monday.
The HSBC Manufacturing Purchasing Managers' Index (PMI), compiled by Markit, fell to 52.4 in August from 53.0 in July but chalked up its tenth month above the 50 mark that divides growth from contraction.
The new orders sub-index fell to 54.5 from 55.9, still considered a healthy pace of expansion.
"Output and new orders slowed slightly in August, but remained robust relative to their 12-month history," said Frederic Neumann, co-head of Asian economic research at HSBC.
"The mood remains positive too, with firms accumulating inventory in response to stronger demand."
India's gross domestic product grew at an annual rate of 5.7 percent in the quarter to June, its fastest growth rate in two-and-a-half years.
But inflation will continue to be a concern for policymakers, the survey showed. Although the sub-index for input prices cooled in August, it remains high.
"This is likely to keep the central bank guarded against inflation risks," Neumann added.
In July, consumer inflation accelerated to a two-month high of 7.96 percent.
The Reserve Bank of India kept its key policy rate on hold in August. Governor Raghuram Rajan stressed that his next goal was to bring retail inflation down to 6 percent by January 2016, although he warned of upside risks to that target.