Faster output growth and an increase in export orders have helped India's manufacturing sector to remain "steady" at 52.8 in September, same as August, according to the HSBC India Manufacturing Purchasing Managers' Index (PMI) — a measure of factory production.
The HSBC index has however remained above the 50-mark, below which it indicates contraction, for more than three years now.
"Economic activity in the manufacturing sector held steady supported by faster output growth and rising export orders. However, a rise in inventories may dampen output growth in coming months," said Leif Eskesen, chief economist for India and ASEAN, HSBC.
Going forward, output growth is likely to weaken as post-production inventories of finished goods have increased significantly, the report said.
The report said that the inflation scenario was "mixed", though output prices increased less, input prices rose at a faster pace due to higher raw material and diesel prices.