Survey results indicated that the Indian economy has remained resilient, at least for now, despite concerns about faster rate hikes, massive capital outflows, a weak rupee and a rapidly slowing global economy.
The manufacturing PMI, compiled by S&P Global, jumped to 56.4 in July from 53.9 in June, remaining above the 50 level that separates growth from contraction for a 13th month.
While new orders and output grew at their fastest pace since November, input and output prices rose at their slowest rate in several months in another boost to demand.
“Indian manufacturing recorded a welcome mix of faster economic growth and lower inflation during the month of July,” said Poliana de Lima, associate economic director at S&P Global Market Intelligence.
“With shortages fading, input cost inflation fell to an 11-month low in July, bringing the rate of increase in output prices down to the weakest in four months.”
If this translates into general price pressures, which are already showing signs of abating amid the slowdown in commodity and food prices, it may provide some breathing space for the Reserve Bank of India.
The Reserve Bank of India, which has already raised its key interest rate by a cumulative 90 basis points since early May, is expected to raise it again this week.
The International Monetary Fund recently cut India’s growth forecast to 7.4% and 6.1% for 2022 and 2023, respectively, from 8.2% and 6.9% in April amid downside risks from a global economic slowdown.
The S&P Global survey also showed foreign demand expanded at the weakest pace in four months in July and optimism improved slightly last month.
Companies increased headcount at the slowest pace in three months.
“Although the increase in demand has gained strength, there are clear signs that capacity pressures have remained moderate as backlogs rose marginally and job creation remained weak,” de Lima said.
MI