India's Manufacturing Growth Moderates In July, But Expansion Remains Strong

Growth in manufacturing activity in India slowed down in July for the second consecutive month, as both output and new orders saw a slight moderation.

However, the expansion rate remained healthy, as indicated by a private business survey conducted on Tuesday, according to reports.

Despite declines in manufacturing activity among other major producers, the sector in India has remained resilient.

This suggests that the country's economy, which is the third-largest in Asia, is still on a strong and stable footing.

The Manufacturing Purchasing Managers' Index (INPMI=ECI), compiled by S&P Global, showed a slight dip to 57.7 last month from June's 57.8.

The global manufacturing sector has defied the trend of weak demand in other parts of the world, maintaining its position as a star performer.

This was highlighted by Andrew Harker, economics director at S&P Global Market Intelligence.

In July, the Indian manufacturing sector continued to exhibit strong growth momentum. Production lines remained active, driven by robust new order growth.

Despite a slight moderation in output growth to a three-month low, new orders remained strong in July.

Exports were fueled by foreign demand, resulting in the fastest pace of growth since November.

According to reports, businesses anticipate continued elevated activity in the coming year, as indicated by the high future output sub-index of 65.3 (slightly lower than June).

Last month, firms were encouraged by optimism, leading to an increase in hiring more workers.

According to Harker, the pressure on capacity continued, which prompted firms to expand employment solidly once again. This trend is expected to continue in the upcoming months as long as the demand remains strong.

Input prices have been rising at the fastest pace since October, resulting in a slower increase in output prices compared to the previous month. This indicates uncertainty regarding inflation.

In June, annual retail inflation rose to 4.81%, breaking a four-month period of easing.

It is expected to continue increasing in the coming months, causing markets to anticipate that the Reserve Bank of India will maintain its high key policy rate for a longer duration.