The Nikkei Markit India Manufacturing Purchasing Managers’ Index (PMI) — a composite indicator of manufacturing performance — rose to 52.6 in August from 51.8 in July.
An index reading of above 50 indicates an overall increase in economic activity, and below 50 an overall decrease.
“With demand from the domestic and external markets picking up, companies raised output accordingly. Firms recorded an easing in cost inflation during the month, which in turn resulted in a softer overall increase in factory gate charges,” financial services firm IHS Markit, which compiles the monthly report, said in a statement here.
“Climbing from 51.8 in July to a 13-month high of 52.6 in August, the headline index showed a solid improvement in the health of the sector,” it said.
“Manufacturing PMI data show that the positive momentum seen at the beginning of the second semester has been carried over into August, with expansion rates for new work, buying levels and production accelerating further,” said Pollyanna De Lima, economist at Markit and author of the report.
Moreover the sector’s growth dynamics for the near-term are encouraging as companies will likely continue their efforts to replenish stocks, De Lima said.
“In fact, IHS Markit forecast a robust 7.5 per cent increase in real GDP during the fiscal year 2016-17,” she added.
The Indian economy grew at 7.9 per cent in the fourth quarter of 2015-16, taking the overall growth in gross domestic product (GDP) to 7.6 per cent for the entire fiscal.
De Lima said, on the price front, survey data highlighted softer increases in input costs and output charges and, in both cases, inflation rates were below their respective trends.
“In light of these numbers, the RBI (Reserve Bank of India) has scope to loosen monetary policy in the upcoming meeting to further support economic growth in India,” she said.