Manufacturing activity eased to 58.1 in July from 58.3 a month back, as new orders and ouput growth slowed marginally, results of a HSBC survey showed.
The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index remained higher than the long-term average for yet another month, as the economy kept humming at the start of the second quarter.
Exports remained a bright spot with international sales expanding at the second-strongest rate in over 13 years, it said.
“India’s headline manufacturing PMI showed a marginal slowdown in the pace of expansion in July, but with most components remaining at robust levels, the small drop is no cause for concern,” said Pranjul Bhandari, chief India economist, HSBC.
“The continuous increase in the output price index, driven by input and labour cost pressure, may signal further inflationary pressure in the economy,” Bhandari added.
The HSBC Survey said that the favourable demand conditions helped keep employment levels high, but also pushed input costs higher with inflation galloping.
Producers were able to pass on the costs to consumers with rate of inflation rising to its highest level in about 11 years, it added.
Input costs surged at one of the quickest paces in nearly two years, driving the sharpest increase in selling prices since October 2013. This has contributed to the fastest output price inflation in nearly 11 years, indicating potential inflationary pressures in the broader economy.
Despite the rising demand, suppliers were able to meet delivery deadlines, with input lead times shortening for the fifth consecutive month.
Notably, manufacturing accounts for less than one-fifth of the country’s economy but in a recent budget the government announced spending plans aimed at boosting the sector.