India manufacturing sector reports expansion in most recent quarter

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India’s manufacturing sector expanded at the strongest pace in three months in July, amid a rebound in production and demand that led to an increase in hiring for the first time in more than a year.

The headline manufacturing purchasing managers’ index, or PMI, rose to 55.3 in July from 48.1 in June, survey results from IHS Markit showed on Monday.
Any reading above 50 indicates expansion in the sector.

Factory orders improved in July amid a sharp increase in demand from abroad. Output and sales also increased in July.

Employment rose at a softer pace and ended in a 15-month sequence of job-shedding. Purchase of stocks increased in July. Backlogs of work rose and suppliers’ delivery time lengthened. Input prices rose in July and output charges increased at a softer rate.

“Hence, we expect the RBI [Reserve Bank of India] to keep interest rates unchanged in its August meeting as it continues to support growth,” Pollyanna De Lima, economics associate director at IHS Markit, said.

Positive sentiment improved in July and firms foresee output growth in the next 12 months.

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