The country's manufacturing sector activity eased in February from a near eight-year high in the previous month and business sentiment took a hit amid impact of coronavirus outbreak on exports and supply chains, a monthly survey said on Monday.
At 54.5 in February, the headline seasonally adjusted IHS Markit India Manufacturing Purchasing Managers' Index (PMI) held close to January's near eight-year high of 55.3, signalling improvement in operating conditions across the sector.
This is the 31st consecutive month that the manufacturing PMI has remained above the 50-point mark.
In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.
"Factories in India continued to benefit from strong order flows in February, from both the domestic and international markets. The pick-up in demand meant that companies were able to further lift production and input buying at historically-elevated rates," said Pollyanna de Lima, Principal Economist at IHS Markit.
The strong manufacturing sector expansion seen in India at the start of the year was maintained in February, with rates of growth for factory orders, exports and output holding close to January's recent highs. While firms were willing to step up input buying, hiring activity increased only fractionally.
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"However, alarm bells are ringing for Indian goods producers as the COVID-19 outbreak poses threats to exports and supply chains. Businesses became less confident about the year-ahead outlook for output, in turn restricting hiring activity," Lima added.
The coronavirus outbreak has brought a large part of the world's second-largest economy China to a standstill and its impact has been felt across industries.
On January 30, the World Health Organization (WHO) declared the coronavirus (COVID-19) outbreak a global health emergency.
The number of deaths globally in the new coronavirus outbreak passed 3,000 on Monday, as China reported 42 more deaths.
On the price front, there was only a moderate increase in input costs, the survey said.
"...Price data continued to highlight a lack of inflationary pressure in the sector. Only modest increases in input costs and output charges were recorded in February, a trend that has been a key theme of the manufacturing PMI survey for over a year," Lima said.
Meanwhile, India's economic growth slowed to a near seven-year low of 4.7 per cent in October-December 2019.
Despite being one of the strongest periods due to festival season and higher rural spending driven by kharif harvest, October-December was the third straight quarter of growth decline and the lowest rate in 27 quarters.