Indicating a slowdown in India's economic upturn, the country's manufacturing sector growth slackened in June as the new order flow hit its lowest level in 10 weeks, an HSBC survey showed today.
The slowdown in factory output growth also led to the companies turning cautious on their hiring plans, HSBC said, while adding that RBI is likely to cut interest rate with inflation under control and growth losing steam.
The monthly HSBC India Purchasing Managers' Index (PMI) fell to 51.3 in June from 52.6 in May, largely because of the new orders rising at their slowest pace September.
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"Following the pickup in growth rates for output and new orders seen in May, June PMI data pointed to a slowdown in India's economic upturn," said Pollyanna De Lima, Economist at research firm Markit, which compiles the data.
PMI is a composite gauge designed to give a single figure snapshot of manufacturing business conditions. A figure above 50 indicates expansion while one below that level means contraction.
"New business expanded at a noticeably weaker pace, in part reflecting a loss of momentum in export business. Moreover, manufacturers remained in cautious spirits and employment numbers were unchanged once again," Lima added.
On employment, the report said, there were no significant changes in payroll numbers since the opening month of 2014 and firms reportedly maintained a cost-cautious approach to hiring.
On prices, it said the easing in inflation rates was a welcome move. Moreover, costs and charges both rose at rates that were historically muted.
"With price pressures being weak and growth losing steam, June's data set suggests that the RBI's loosening cycle is, therefore, likely to continue," Lima said.
In the June 2 policy review meet, RBI had cut repo by 0.25 per cent for the third time this year to spur investment and growth, but hinted that there may not be any more cuts in the near term.
RBI cut the repo rate (short-term lending rate) from 7.5 per cent to 7.25 in June, but left all other policy tools such as cash reserve ratio (CRR) and statutory liquidity ratio (SLR) unchanged at 4 per cent and 21.5 per cent, respectively.
