New Delhi: In a smart recovery, the manufacturing sector grew at its fastest pace in six months in July on increased export order flows but hiring remained sluggish, a monthly survey showed on Monday.
The data came a day before RBI's scheduled monetary policy review meeting, where the central bank is widely expected to keep its policy rates unchanged. However, some analysts including those at Moody's Analytics expect a rate cut as a sustained recovery is yet to be seen in manufacturing sector.
The Nikkei India Manufacturing PMI -- a composite indicator of manufacturing sector performance -- rose to 52.7 in July from 51.3 in June, logging a six-month high, indicating an improvement in business conditions.
A figure above 50 represents expansion while one below means contraction.
As per the survey, growth of new export business orders accelerated in July to reach its highest level in five months. However, the outstanding business orders got accumulated for the second month running.
"Growth in India's manufacturing economy rebounded in July, with PMI rising since the prior month. This reflects stronger increases of new orders and output. Furthermore, the sector was boosted by the quickest expansion in export orders since February," said Pollyanna De Lima, Economist at Markit, which compiles the data.
Despite the uptick in growth, manufacturers continued to cut down workforce in July. Around 96 per cent of respondents reported no change in staff strength from the levels in the prior month.
"Although the latest data suggest that the manufacturing upturn gained traction, worries regarding the labour market persist," Lima said, adding that "continued job shedding highlights the concern felt by businesses towards the outlook, with firms failing to increase workforce numbers to any great extent since early 2014".
On prices, the survey said the rate of inflation was only marginal and well below the series long-run trend.
"While this is a generally positive set of data, upcoming PMI data releases will indicate whether the manufacturing sector can sustain this momentum," Lima said.
RBI, in its last policy review on June 2, had cut the repo rate by 0.25 per cent for the third time this year to spur investment and growth, but hinted that there may not be any more cuts in the near term.
