Growth momentum across India’s manufacturing economy lost some impetus as output, new orders and employment rose at slower rates during January, a monthly survey said today. The Nikkei India Manufacturing Purchasing Managers’ Index (PMI) fell from December’s 60-month high of 54.7 to 52.4 in January, indicating modest improvement in operating conditions across India’s goods producing economy.

This is for the sixth consecutive month that the index remained above 50-point mark that separates expansion from contraction. “Following December’s stellar performance, growth in the Indian manufacturing economy lost some impetus, reflected by slower growth in output, new orders and employment,” said Aashna Dodhia, Economist at IHS Markit and author of the report.

Growth in total new orders was supported by stronger sales from international clients as new export orders rose at the sharpest pace since September 2016. “A revision on rates of duty drawbacks on 102 items is expected to enhance India’s international competitiveness, and possibly translate into stronger overseas demand over the coming months,” Dodhia said.

However, the Goods and Services Tax (GST) continued to remain a “risk to business performance” as firms faced further delayed payments, Dodhia said. In response to improved demand conditions, firms raised their staffing levels during January. However, the pace of job creation eased to a modest pace that was the weakest since last October.

“On the price front, higher input costs continued to exert pressure on firms’ margins as manufacturers were reportedly unable to fully pass on higher cost burdens to customers that remained reluctant to spend,” Dodhia further said.