With demand picking up after the general elections, the HSBC purchasing managers’ index (PMI) for the manufacturing sector touched a 17-month high in July.
The index rose to 53, up from 51.5 in June, signalling improved business conditions as companies scaled up production.
The index is a measure of factory production. It is based on data compiled from monthly replies to questionnaires sent to purchasing executives in around 500 manufacturing companies. A score above 50 reflects expansion, while any number below 50 indicates a decline.
However, the surge in the index may not mean there is good news for India Inc.
“The speed of the recovery has also lifted price pressure, with input prices rising steeply. This means the Reserve Bank of India may not cheer as loudly as the rest of us,” said Frederic Neumann, Co-Head of Asian Economic Research at HSBC.
The survey found that business and consumer sentiment had improved after the elections. Demand, too, picked up in the international as well as domestic market. This was also reflected in the industrial production estimate for May, which registered a growth of 4.7 per cent.
Drop in job numbers However, the survey pointed to a reduction in employment numbers, albeit marginally, for the first time since September.
Firms producing consumer and intermediate goods registered a decline in employment, while investment goods firms reported some job creation.