Manufacturing activity expanded at a slower rate in April compared to its levels in March, according to a private sector survey.
The Nikkei India Manufacturing Purchasing Managers’ Index registered a reading of 51.8 in April, lower than the 52.6 in March.
A reading over 50 indicates an expansion while one below 50 denotes a contraction.
“A softer increase in new orders created a domino effect in the Indian manufacturing industry, restricting growth of output, employment, input buying and business sentiment,” the report said.
“The one bright spot in April was exports, which expanded solidly and at a slightly quicker pace than in March.”
“Broken down by sector, capital goods was the key source of weakness, recording contractions in new business and output,” the report added.
“Growth was meanwhile sustained at both consumer and intermediate goods makers.”
The report went on to say that new business growth moderated in April reportedly due to the ongoing General Elections and also in response to a challenging economic environment. The increase in order book volumes was the slowest in eight months, it said.
“The slowdown in growth of total sales, coupled with cashflow difficulties and competitive pressures, hampered output expansion in April,” the report said. “Although production rose, the increase was the slowest since last September.”
RBI rate cut likely
“Although remaining inside expansion territory, growth continued to soften and the fact that employment increased at the weakest pace for over a year suggests that producers are hardly gearing up for a rebound,” Pollyanna De Lima, principal economist at IHS Markit and author of the report, said.
Ms. De Lima added that the fact that price pressures were cooling in the manufacturing economy and growth was losing momentum makes it increasingly likely that the Reserve Bank of India may cut interest rates for the third consecutive time in June.