A slower rise in new business inflows resulted in weaker expansion of manufacturing output, which came in at a 22-month low in October, a private survey showed on Monday.
The Nikkei India Manufacturing Purchasing Managers’ Index (PMI) — a composite single-figure indicator of manufacturing performance — fell to 50.7 in October from 51.2 in September. The 50 mark divides expansion (above 50) from contraction.
This is the third straight monthly fall for the manufacturing PMI and could prompt the government to go in for structural reforms in the coming days.
In October, the rate of expansion in both production and order books was the weakest in the current 24-month sequence of growth. A sub-index covering new orders dropped to a two-year low of 51.2 from 52.5 in September.
Pollyanna De Lima, an economist at Markit, said that a return to inflationary pressures indicates that the Reserve Bank of India may pause its loosening cycle for the rest of the year following a 50-basis-point cut to the key repo rate in September.
Interestingly, India’s manufacturing PMI has always been above the crucial 50 threshold in each month since November 2013. Despite the slowdown in new order growth, manufacturers hired additional workers in October, the survey showed. Encouragingly, companies added to their workforces for the first time since January and continued to increase buying levels. October saw inflationary pressures return to India’s manufacturing economy, the survey, compiled by Markit, showed.
Average purchase costs rose amid reports of higher metal, paper and food prices.
The rate of increase was, however, only slight in the context of historical data. Part of the additional cost burden was passed on to clients as tariffs were raised.