Despite improved manufacturing conditions – new orders accelerated at a five-month high – the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) in February remained constant at January’s level of 51.1.
“Manufacturing business conditions in India continued to improve, with new orders, exports, output and purchasing activity all rising in February. However, a faster expansion in new business inflows failed to lift growth of output, and workforce numbers were left broadly unchanged again,” it said in a release on Tuesday. The PMI data also highlighted a weaker rise in costs and the first cut in selling prices since September last year.
A reading above 50 on the PMI indicates contraction while a reading above 50 reflects expansion. The reading of 51.1 in January was a four-month high.
“Although businesses saw a stronger rise in new work, data implied that this was partly driven by price reductions,” said Pollyanna De Lima, Economist at Markit, adding that goods producers also continued to benefit from lower global crude oil prices.
Noting the low inflationary pressures, she also pitched for further monetary easing by the Reserve Bank of India. “In light of these numbers, the RBI has scope to loosen monetary policy to spur the economy,” Lima said.
Closer home, Chief Economic Advisor to the Finance Ministry Arvind Subramanian had also noted that “given the low inflation expectation, there is scope for more easing of monetary policy by the RBI”.
However, RBI Governor Raghuram Rajan on February 2 left the key interest rate unchanged due to concerns over inflation and growth, while pegging further easing of monetary policy to the government’s Budget proposals
Meanwhile, according to the PMI, while input costs rose for the fifth month running in February, employment levels remained unchanged in manufacturing sectors remained unchanged.
“Manufacturers’ buying levels rose for the second successive month,” it noted, adding that backlogs of work were accumulated amid reports of delayed payments from clients.