Manufacturing activity rises in June, PMI at 53.1

India’s manufacturing conditions improved in June at the strongest pace in 2018 so far, as favourable demand conditions led to greater output, a private survey showed on Monday.

The Nikkei India Manufacturing Purchasing Managers' Index, or PMI, rose to 53.1 in June from 51.2 in May.

A reading above 50 indicates an expansion in manufacturing activity while one below 50 points to contraction.


“India’s manufacturing economy closed the quarter on a solid footing against a backdrop of robust demand conditions, highlighted by the sharpest gains in output and new orders since last December”, said Aashna Dodhia, Economist at IHS Markit and author of the report.

Orders from international markets rose at the strongest pace since February.

As per the survey, the rate of growth of manufacturing production was the most pronounced since last December. Moreover, stronger demand conditions made firms raise their staffing levels.

However, Dodhia pointed to a note of caution looking ahead, as business sentiment eased to the weakest since last October during June based on concerns of a potential market slowdown in the year ahead.

“Indeed, some of the key challenges to the 12-month outlook include tighter domestic monetary policy and persistently high inflation,” she said.

Though the Reserve Bank of India recently raised interest rates for the first time in four years to contain inflation and stabilise the rupee, input cost inflation quickened to the strongest since July 2014 in June, suggesting that the central bank could remain under pressure to tighten monetary policy.