India's manufacturing sector eased in June due to weak growth in new business inflows as companies took a cautious line on hiring, an HSBC survey said on Wednesday.
The HSBC India Purchasing Managers' Index (PMI) fell to 51.3 in June from 52.6 in May, amid slowest rise in new orders since September 2014.
"Following the pick-up 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 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 are no significant changes in payroll numbers since the opening month of 2014, and firms reportedly maintained a cost-cautious approach to hiring. On prices, the report 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.
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