Manufacturing sector returned to growth in January, expanding at a four-month high pace on rise in new business orders, a monthly survey showed on Monday, adding to the expectations of RBI keeping rates unchanged on Tuesday. The return to growth follows the first contraction in factory output in over two years in the previous month.
While Chennai floods had taken a toll on the manufacturing sector in December, the sector saw production as well as new orders — both domestic and export — surge in January as per the monthly Purchasing Managers Index (PMI) survey conducted by Nikkei and Markit.
The Nikkei India Manufacturing PMI, a composite monthly indicator of manufacturing performance, stood at 51.1 in January, up from 49.1 in December. A figure above 50 represents expansion while a reading below this level means 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,” Pollyanna De Lima, Economist at Markit and author of the report said.
Though the trends in the growth rates are relatively weak in comparison with the long-run series averages, January’s PMI data paints a brighter picture of the Indian economy, Mr. Lima said.
On inflation, the report said price pressure remained on the upside in January, with input costs and output charges both rising during the month.