India's July manufacturing PMI index hits four-month high

Mumbai, Aug 1  The country's manufacturing sector saw a significant uptrend in July registering the highest reading since April this year, as both production and new orders rose, a key macro-economic data showed on Monday.

The Nikkei India Manufacturing Purchasing Managers' Index (PMI) -- a composite indicator of manufacturing performance -- rose to 51.8 in July from 51.7 in June.

An index reading of above 50 indicates an overall increase in the economic activity, and below 50, an overall decrease.

According to the financial services firm IHS Markit, which compiles the monthly report, India's manufacturing economy revived at the beginning of the second half of 2016 after the slowdown seen in the April-June quarter, as growth of both production and new orders continued to strengthen in July.

"Although output expanded at the fastest rate since March and backlog accumulation intensified, businesses refrained from creating jobs. The ongoing muted trend for employment indicates that companies remain somewhat uncertain regarding the sustainability of the upturn," said Pollyanna De Lima, economist at Markit and author of the report.

Delving deeper into the data we see that the consumer goods sub-sector kept its place as the prime driver of the overall upturn. Although demand for plant and machinery improved, investment goods output dropped, De Lima said.

"Separately, the depreciation of the rupee supported Indian exporters as survey data pointed to the quickest rise in new business from abroad since January," she said.

De Lima said that offering respite to firms, cost burdens rose at a modest and slower rate and the improving demand environment meant that businesses were able to raise their own charges in July.

"With inflation rates remaining lower than their respective long-run averages, it wouldn't be surprising to see the RBI (Reserve Bank of India) loosening monetary policy at its August meeting in an effort to encourage investment," she added.

The Indian economy grew at 7.9 per cent in the fourth quarter of 2015-16, taking the overall GDP growth to 7.6 per cent for the entire fiscal.