India's manufacturing sector activity during September expanded at the slowest pace in nine months amid weaker output and new order flows, an HSBC survey said.
The headline HSBC India Purchasing Managers' Index (PMI) -- a composite gauge designed to give a single-figure snapshot of manufacturing business conditions -- dropped from 52.4 in August to 51.0 in September, the slowest pace of growth since December, 2013.
Although business conditions dropped to a nine-month low, operating conditions in the Indian manufacturing sector improved for the eleventh month in succession in September.
A figure above 50 indicates the sector is expanding, while a figure below that level means contraction.
"Manufacturing activity continues to slow amid weaker output and new order flows. Responding to the slowdown, firms lowered purchases and trimmed inventories," HSBC Co-Head of Asian Economic Research Frederic Neumann said.
Indian manufacturers, however, witnessed significant improvement in export orders in September.
Meanwhile, workforce numbers in India remained broadly unchanged in September, as the vast majority of survey respondents signalled no change in staffing levels.
On price rise, HSBC said that the rate of cost inflation decelerated sharply while output prices were unchanged.
"The central bank is likely to look beyond the near term moderation and keep policy rates elevated so as to reign in entrenched inflation expectations," Neumann said. Reserve Bank Governor Raghuram Rajan on Tuesday left all key rates unchanged citing continued risks to inflation and difficult external situation especially on the geopolitical front.
This is the fourth consecutive time that the RBI has kept key interest rates unaltered.
The short-term lending rate (repo) rate remained at 8 per cent, and the cash reserve requirement of banks at 4 per cent.
"The RBI would rather see growth recover supported by supply side reforms than through monetary policy stimulus," Neumann added.
Image: Cars lined up at a car manufacturing unit.
Photograph: Reuters
