India’s manufacturing activity rose for the ninth straight month in September driven by rise in new orders and increase in purchasing activity. However, the rate of growth was slower due to inflationary pressures.
The Nikkei India Manufacturing Purchasing Managers’ Index – compiled by Nikkei and research firm Markit – stood at 52.1 in September compared to 52.6 in August.
The biggest area of strength was the external demand as firms saw the strongest rise in new export orders since July 2015, supported by growth in output and purchasing activity.
The latest PMI figures showed an "intensification of inflationary pressure" with input costs and output charges increasing at quicker rates.
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.Pollyanna De Lima, Economist, IHS Markit and author of the report
Why Growth Rates Eased
A softer increase in business inflows due to stronger competition for new business contributed to the slowdown, the report added. While greater workplace activity resulted in business expansion, the quantities of purchases rose at the slowest pace since June and job creation was marginal.
Inventories declined and raw material costs increased for the tenth straight month. Average purchase cost increased at a faster pace in September but was weak compared to its long-term trend, especially steel. "Data implied that manufacturers attempted to protect profit margins as output charges were raised further", the report said.
Other factors included weaker vendor performance, slower delivery time due to shortage of raw materials and rise in backlogs for the fourth straight month.