As per the monthly Purchasing Managers Index (PMI) survey conducted by Nikkei and market intelligence firm Markit, India’s PMI rose from 49.1 in December to 51.1 in January.
A reading below 50 in the PMI index indicates a contraction.
“The opening month of 2016 saw a rebound in new business — from both domestic and external clients — leading manufacturers in India to scale up output following a short-lived downturn recorded in December,” Markit economist Pollyanna De Lima said in the PMI report.
“Whereas the trends in the growth rates are relatively weak in comparison with the long-run series averages, January’s PMI data paint a brighter picture of the Indian economy,” De Lima said.
Rising inflows of new business from domestic and export clients benefited manufacturers along with the resumption of output of some firms which were impacted by December floods.
Though PMI moved back above the 50-mark in January, the rate of expansion was just moderate but signalled the sharpest rise in the last four months.
Total new business and levels of production registered mild increases following contraction in December 2015.
In the beginning of 2016, consumer goods sub-sector remained the principal growth engine witnessing substantial expansions in new orders and output, while investment goods producers experienced decline in new orders and output.
In each of the past 28 months, incoming new oversees orders have risen. The trend continued in the month under review, with strengthened exports orders in January.
In addition, last month saw employment increase in the Indian manufacturing sector across consumer, intermediate and investment goods categories linking expanded payroll numbers to rise in production requirements.
“However, January’s increase in employment was insufficient to reduce the pressure on manufacturers’ capacity,” the report noted.
For the last three months in a row, backlogs of work at factories further accumulated to reach the highest since March 2015.
Indications of price pressures remained on the upside in January. Higher demand for raw materials resulted in cost escalations with both input and output charges rising in the month under review.
However, input cost eased slightly and remained below the long-run survey average.
Reaching a 14-month high, factory gate prices increased for the fourth successive month in January.
Respondents attributed the rise in charges as a way to pass on the increase in purchasing costs.
Due to rise in the level of input buying activity, January witnessed a modest rise in stocks of purchases and contrastingly inventories of finished goods products again fell.
On the central bank’s monetary policy, De Lima said: “Although the RBI (Reserve Bank of India) is likely to continue its monetary policy loosening cycle in 2016.”
“February’s meeting will probably see the repo rate remain unchanged at 6.75 percent as the central bank will remain wary of inflationary pressures building in the country.”
–Indo-Asian New Service