Business conditions for manufacturing firms improved “marginally” in May and the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) rose to 50.7, against 50.5 in April.
Though this was the fifth straight month of improvement in the index, it was also the slowest rise in manufacturing production in the period and was one of the lowest readings since end of 2013.
“This latest above-50 reading highlighted an overall improvement in operating conditions, the fifth in as many months, but one that was marginal overall,” said a statement on Wednesday.
A reading above 50 represents expansion while one below this level means contraction.
“Signs of challenging economic conditions in the Indian manufacturing sector were evident in May, with output losing further growth momentum. The headline PMI remained in expansion territory, but recorded one of its lowest readings since the end of 2013, suggesting that the sector is barely improving,” said Pollyanna De Lima, Economist at Markit and author of the report.
Though, the economy grew at 7.9 per cent in the fourth quarter of 2015-16, industrial production has been lower than estimated in March and the latest data is likely to raise calls for a rate cut by the Reserve Bank of India in its second bi-monthly monetary policy review on June 7. Retail inflation, however, jumped to 5.39 per cent in April.
New export orders According to the PMI survey, new orders expanded at a faster pace and order book volumes increased, but the expansion in both were below the trend.
Worryingly, new export orders fell for the first time in 32 months.
“Data implied that growth was centred on the domestic market...The latest drop in new export orders was the first since September 2013, with survey participants commenting on subdued global demand,” said the release.
The rate of job creation was, however, only marginal. In contrast, the rate of inflation was the most pronounced since March 2015.
Intermediate goods were the best performing category in May with higher growth in new orders and output as compared to consumer goods. Investment goods firms, in contrast, saw further decline in new work and production.