Indian manufacturing sector growth rose to a four-month high in January driven by rising inflows of new business orders from domestic as well as export clients, says a Nikkei survey.
Following the contraction in December in the wake of Chennai floods, January saw the Indian manufacturing sector rebound into expansion territory, as production and new orders recovered, the report said.
The Nikkei India Manufacturing PMI, a composite monthly indicator of manufacturing performance, stood at 51.1 in January, up from 49.1 in December.
A figure above 50 represents expansion while a reading below this level means contraction.
“The opening month of 2016 saw a rebound in new business â€“ from both domestic and external clients â€“ leading manufacturers in India to scale up output following a short-lived downturn recorded in December,” Pollyanna De Lima, Economist at Markit and author of the report said.
Though the trends in the growth rates are relatively weak in comparison with the long-run series averages, January’s PMI data paints a brighter picture of the Indian economy, Lima said.
On inflation, the report said price pressure remained on the upside in January, with input costs and output charges both rising during the month.
“Although the RBI is likely to continue its monetary policy loosening cycle in 2016, February’s meeting will probably see the repo rate remaining unchanged at 6.75 per cent as the central bank will remain wary of inflationary pressures building in the country,” Lima said.
According to official figures, WPI as well as retail inflation has been on a rising trend. In December, WPI-based inflation stood at (-)0.73 per cent, while retail inflation was at 5.61 per cent.
The apex bank will announce its sixth Bimonthly Monetary Policy Review tomorrow, the last before presentation of the Budget amid clamour for rate cut to give a boost to the economy.
The government recently lowered its economic growth forecast for 2015-16 to 7-7.5 per cent from 8.1-8.5 per cent.