India's manufacturing sector's expansion slowed last month due to weak demand, a key macro-economic data showed on Monday.
The Nikkei India Manufacturing Purchasing Managers' Index (PMI), which is a composite indicator of manufacturing performance stood at a four-month low of 50.9 in June from the index reading of 51.6 reported in May 2017.
Nevertheless, the headline figure averaged 51.7 during the April to June quarter, above the 51.2 seen in fourth quarter FY 2016.
An index reading of above 50 indicates an overall increase in economic activity, and below 50 an overall decrease.
"For the third month in a row production growth in India eased during June. The slowdown occurred due to weak client demand, with order books up at a slight and softer pace," said Pollyanna De Lima, economist at IHS Markit and the author of the report.
"In many cases, businesses indicated that growth was held back as a reflection of water scarcity and the impending introduction of the goods and services tax (GST)."
According to the report, input costs continued to increase, with "anecdotal evidence" pointing towards higher prices of chemicals, food, plastics and rubber.
However, the rate of inflation was modest and the weakest since August 2016. Likewise, output charges rose only slightly and at a below-trend pace.
"On a more cheerful pitch, the PMI survey showed strong foreign demand for Indian-manufactured products in June. New orders from external markets increased at a solid rate that was the most pronounced in eight months," De Lima said.
"Confidence towards future performance was mixed among goods producers. While the new tax system is anticipated by some firms to generate more business, others expect the GST to have a detrimental impact on their order books. As such, overall optimism slipped to a three-month low."
--IANS
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