India manufacturing PMI at four-month high in July
Reuters | Photo Credit: Reuters

India’s manufacturing activity improved to a four-month high in July thanks to new business orders, a private survey showed on Monday. 

The seasonally adjusted Nikkei India Manufacturing Purchasing Managers’ Index (PMI) edged higher to 51.8 in July from June’s 51.7, according to data compiled by Markit. Growth was led by consumer goods producers, it said.

New business rose at the fastest pace since March thanks to higher demand from both the local and export markets. Growth of new export orders climbed to a six-month high, helped by a weakness in the rupee, with the consumer and capital goods categories reporting an increase.

“India’s manufacturing economy is reviving at the beginning of the second half of 2016 after  the slowdown seen in the April-June quarter, as growth of both production and new orders continues to strengthen in July," said Pollyanna De Lima, economist at Markit and author of the report.

Input costs in July rose at the slowest pace in five months, offering respite to companies.

But hiring trends remained relatively muted. Only 1% of surveyed companies took on additional workers in July. Almost all the remaining respondents signalled no change in payroll numbers.

"The ongoing muted trend for employment indicates that companies remain somewhat uncertain regarding the sustainability of the upturn," De Lima said. She added that it wouldn’t be surprising to see the Reserve Bank of India loosening monetary policy at its August meeting to encourage investment as inflation is lower than the long-run average.

The RBI has lowered interest rates by 150 basis points since January 2015, including a 25-basis-point reduction in April. But RBI governor Raghuram Rajan, whose term ends in September, kept rates unchanged at the policy review meeting on June 7 citing risks to inflation.

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