Bangalore: Indian manufacturing growth cooled in June after a surge in activity the prior month, mainly due to slowing production and rapidly easing input price pressures, a survey showed on Thursday.
The HSBC Markit Purchasing Manager’s Index, based on a survey of 500 companies, slipped to 57.3 in June from 59.0 in May, which was the highest in more than two years.
Still June was the 15th consecutive month that the index has been above the 50 mark that divides growth from contraction.
“India’s economy is stepping back a little, with output growth easing into June,” said Frederic Neumann, co-head of Asian Economics Research at HSBC, in a release.
New orders growth ebbed slightly from last month. But the most notable decline in the sub-components of the survey in June was the fall in the input price index to 53.6 from 63.8 the previous month, marking the lowest level in a year.
But this was more due to competition amongst suppliers rather than a fall in demand for raw materials and semi-finished goods, according to the release.
“Both activity and price components are easing from very elevated levels, suggesting that it is too early to worry about growth and let down our guard on underlying price trends,” said Neumann.
Indian wholesale price inflation still remains stubbornly high in the double-digit region but many speculate it will cool due to a forecasted drop in food inflation with the onset of the monsoon.
But the extent of the recent fuel price hikes beat expectations and many fear that it will further increase wholesale price inflation, compelling the Reserve Bank of India (RBI) to tighten monetary policy before its scheduled meet on 27 July.
Despite an increase in workloads and outstanding business, manufacturers did not add new jobs to their payrolls in June, leaving the employment index stagnating.
Official figures showed Indian exports rose on a year-on-year basis for the seventh straight month in May, and by 35%, as demand picked up from India’s biggest export markets, including the United States.
But the euro area debt crisis could hurt exporters in the coming months.
The latest export figures are due on Thursday.