Manufacturing growth in India eased slightly amid a slower increase in new business orders while subdued inflationary pressure may prompt RBI to reduce key policy rate, a monthly survey said.
The Nikkei Markit India Manufacturing Purchasing Managers’ Index (PMI) — a gauge of manufacturing performance — fell to 52.1 in September from 52.6 in August, indicating that growth in the sector lost some momentum.
“The Indian manufacturing industry lost momentum in September as growth of new orders eased from August’s 20-month high,” said Pollyanna De Lima, Economist at IHS Markit that compiles the data and author of the report.
Despite the fall in manufacturing growth rate, business conditions improved for the ninth straight month as the index held above the crucial 50 threshold. However, the rate of expansion eased since August and was relatively modest. A reading above 50 points to expansion while one below means contraction.
“Output is still rising at a decent clip and the sector looks likely to have delivered a stronger contribution to GDP growth in Q2 of 2016/17, with the quarterly reading for the PMI output index up from 51.4 during April-June to 53.6,” Lima added.
Meanwhile, foreign new orders for India-manufactured goods expanded markedly in September — and at the quickest rate in 14 months.
Greater workplace activity led companies to scale up their buying activity and hire additional workers in September, but only marginally.
On the prices front, the report said average purchase costs rose at a faster pace in September, but it was weak compared to its long-run trend.
“Although inflation rates edged higher, these remain weak by historical standards and indicate that we may still see RBI loosening monetary policy in 2016,” Lima added.
The next policy review meet is scheduled to be held tomorrow.
It will also be the first review under the new RBI Governor Urjit Patel, who assumed charge effective September 4 after end of his predecessor Raghuram Rajan’s three-year tenure.