Manufacturing PMI surges to 53.9 in January; factory orders edge higher

The country's manufacturing sector activity edged higher in January as companies continued to scale up production and employment, driven by the fastest rise in factory orders since December 2017, a monthly survey said Friday.

The Nikkei India Manufacturing Purchasing Managers' Index increased from 53.2 in December to 53.9 in January, indicating stronger improvement in the health of the goods producing sector.

This is the 18th consecutive month that the manufacturing PMI remained above the 50-point mark. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.

According to the survey, the increase in factory orders was the strongest seen in 13 months. Besides, favourable economic conditions, strengthening demand and sales growth also picked up in January.

"The manufacturing industry in January made up for ground lost at the end of 2018, with new business and production expanding at rates not seen for over a year," Pollyanna De Lima, Principal Economist at IHS Markit and author of the report said, adding that it was largely domestic orders that fuelled the accelerations.

On the employment front, Indian manufacturing firms added more staff owing to marked growth of new work orders. "Jobs increased for the tenth straight month, albeit only slightly," it noted.

"The trend for employment remained encouraging, with job creation evident for the tenth month running. Further confidence in market conditions were shown by a rebound in business sentiment, which reached a five-month high. Firms are planning to increase marketing activity to further benefit from robust demand conditions and hence scale up production volumes," Lima said.

The survey noted that inflationary pressures were negligible in the context of historical data.

According to experts the signs of easing inflationary pressures indicate that the Reserve Bank of India (RBI) is likely to adopt an accommodative monetary policy stance.

The next meeting of RBI's Monetary Policy Committee is scheduled between 5th and 7th February.