In August, India’s manufacturing activity continued to grow robustly, led by a pick-up in demand amid softening input cost inflation. In July, inflationary pressures eased following a moderation in global commodity and energy prices, substantially improving business confidence.

The S&P Global India Manufacturing Purchasing Managers Index (PMI) in August 2022 was little changed at 56.2 compared to the eight-month high of 56.4 in July 2022, signalling the second-strongest improvement in operating conditions since November 2021.

“Indian manufacturers continued to benefit from the absence of COVID-19 restrictions, with growth rates for both output and new orders picking up yet again… This robust performance was complemented by a fourth successive monthly slowdown in the rate of input cost inflation,” said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.

India’s retail inflation had eased to a five-month low of 6.71% in July, falling below the 7% mark for the second straight month. However, it remained above the Reserve Bank of India’s upper tolerance limit of 6% for the seventh month. The RBI has projected inflation for 2022-23 at 6.7%. Wholesale price index-based inflation also moderated to a five-month low in July.

“Firms welcomed the weaker increase in input costs with an upward revision to output forecasts amid renewed hopes that contained price pressures will help boost demand. Inflation concerns, which had dampened sentiment around mid-year, appear to have completely dissipated in August as seen by a jump in business confidence to a six-year high,” said De Lima.

The central bank’s monetary policy had projected a growth rate of 16.2 per cent in the first quarter. On Wednesday, as per national accounts data, private consumption revived sharply during the first quarter.