In early signs of recovery in manufacturing growth, the HSBC India Purchasing Managers’ Index (PMI) jumped to a four-month high in May.
The headline HSBC India PMI, compiled by Markit, surged to 52.6 in May, from 51.3 in April, with levels of production and new orders rising at the fastest rates since January 2015.
The PMI is a composite gauge designed to give a single figure snapshot of manufacturing business conditions. A figure above 50 indicates expansion.
Markit economist Pollyanna De Lima said, "The straight 19th month of growth is “however, clouded by a stagnant job market as firms remain uncertain about the sustainability of the upturn."
"PMI data signalled a further robust expansion of the Indian manufacturing economy in May. Both output and new-order growth accelerated to 4-month highs, whereas the rise in export orders lost traction," Lima added.
The healthy figures coming in a day ahead of the RBI’s monetary policy review could be read in line with the widely expected rate cuts to be announced on Tuesday.
On inflation, Lima said, "Input cost inflation ticked higher and output prices were raised in May, but inflation rates are nonetheless weak in the context of historical data. This indicates that further rate cuts are still on the horizon."
The central bank has lowered its policy rate twice so far outside the cycle in 2015, but kept it unchanged at its last review on April 7 due to fears of unseasonal rains affecting food prices.