Mumbai: India’s manufacturing activity expanded for the seventh consecutive month in October, but at a slightly slower pace as growth in new orders and output slowed, a survey showed.

Signs of recovery: A Honda Siel plant at Surajpur, Uttar Pradesh. Growth in industrial production has been robust. Ramesh Pathania / Mint

The HSBC Markit Purchasing Managers’ Index (PMI), based on a survey of 500 companies, fell to 54.5 in October from 55 in September. A reading above 50 means activity expanded during the month.

Growth in domestic new orders may be beginning to suffer from the impact of a drought, but stronger foreign demand was helping to cushion the blow, HSBC senior Asian economist Robert Prior-Wandesforde said.

“The PMI, which led the upturn in the industrial cycle, has gone essentially nowhere over the last six months. It is, however consistent with robust growth in industrial production of around 8-10% on an annual basis," Prior-Wandesforde said.

“If falls in the output and total new orders indices were a touch disappointing, a rise in the employment index back above 50 and a decent improvement in the new export orders index to its highest level since August last year offered welcome news," he added. The new orders index fell to 56.7, from September’s 58.3. In August, this index had touched a four-month low of 56.2.

“Also helpful, from a policy perspective at least, were falls in both input and output prices indices. Although early days, the latter looks to have a decent relationship with wholesale price inflation and might help calm what are clearly extremely frayed nerves at the Reserve Bank of India," Prior-Wandesforde said.

The headline index had shrunk for five months through March, hitting a trough of 44.4 in December.

Manufacturing sector in neighbouring China expanded at the fastest pace in 18 months in October as demand from both overseas and at home grew quickly. HSBC’s China PMI rose to 55.4 from 55.0 in September.

The improvement in the reading essentially mirrored that of the PMI produced for China’s National Bureau of Statistics, released on Sunday, which also rose to an 18-month high in part on the back of strong export orders.