India's manufacturing activity picked up in November as new orders and output rose at a faster pace, a survey showed on Monday, although factories were less optimistic about the future, shedding jobs for the first time since March last year.
That is likely to raise concerns any economic recovery could be delayed or remain below potential. Official data showed India's economy expanded at its weakest pace in more than six years in the quarter to end-September.
With the Indian economy needing to grow around 8% each year to create enough jobs for millions of youth joining the labour force, Prime Minister Narendra Modi's government will be pressured to take further steps.
The Nikkei Manufacturing Purchasing Managers' Index, compiled by IHS Markit, rose to 51.2 in November from 50.6 in October, confounding expectations in a Reuters poll for a decline to 49.8.
While the headline PMI has held above the 50-mark that separates growth from contraction for over two years, continued weakness in forward-looking indicators suggests factories were bracing for challenging times ahead.
That is largely because the global economy continues to decelerate and as real progress in the disruptive U.S.-China trade war remains elusive.
While a measure of demand - the new orders sub-index - rose to 52.0 from 51.3 in October, a sub-index measuring hiring by Indian factories went below the breakeven point for the first time since March last year.
"Rates of expansion in factory orders, production and exports remained far away from those recorded at the start of 2019, with subdued underlying demand largely blamed for this," noted Pollyanna De Lima, principal economist at IHS Markit.
"Some level of uncertainty regarding the economy was evident by a subdued degree of business optimism. Also, companies shed jobs for the first time in over a year-and-a-half and there was another round of reduction in input buying."
PMI data also showed a lack of inflationary pressures in November, which should support expectations for the Reserve Bank of India to cut its repo rate for the sixth time in a row at its December 3-5 meeting.