Indicating a partial rebound in factory output after the rollout of the Goods and Services Tax (GST), the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) rose to 51.2 in August.
The Index was at a 101-month low of 47.9 in July.
“The upturn reflected resumed growth of new orders, production and employment,” Nikkei said in a release on Friday, adding that underlying data pointed to a “broad-based recovery”.
A reading of over 50 on the PMI indicates expansion while one lower than the benchmark denotes a contraction.
The data come a day after official statistics on quarterly Gross Domestic Product showed that the economy grew by a mere 5.7 per cent between April and June 2017, bogged down by the after-effects of demonetisation and implementation of GST. But remaining upbeat about growth prospects, IHS retained its real GDP forecast at 7.3 per cent for 2017-18.
“In July, firms indicated that orders, production and purchasing had been postponed due to a lack of clarity about the new tax regime, but they have now been resumed as manufacturers, suppliers and their clients have become more knowledgeable of the GST rates,” said Pollyanna De Lima, Principal Economist at IHS Markit.
The survey found that the rise in new work stemmed from a better understanding of the new taxation system, along with greater promotional activities and a pick-up in demand.
New orders rose the highest in intermediate goods, although growth was also registered in segments of consumer and capital goods.