India’s manufacturing activity in September grew on increased domestic and foreign demand. According to Nikkei India Manufacturing Purchasing Managers’ Index (PMI), the country’s manufacturing activity rose to 52.2 in September this year, from 51.7 in August.
Usually, a score of above 50 on the index signals expansion, while a below 50 score indicates contraction in the manufacturing activity. India, for the last 14 months, is maintaining an above 50 score.
The exports in September saw the highest growth since the beginning of the year. The employment in the sector is also seeing gains, recording a growth for the sixth consecutive month this year.
At the same time, volatility in the global market has raised concerns back home. A strong US dollar and rising crude-oil prices have increased fuel and steel costs for the domestic manufacturers. But, experts believe that rise in demand will continue for the next 12 months, offsetting the impact of increased input costs.
With the rupee touching 73 against dollar, and oil at 83, experts expect the Reserve Bank of India (RBI) to hike rates, even though inflation stands below four percent. An increase in oil prices is expected to raise Consumer Price Index (CPI) by 20-30 bps. Therefore, the hawkish stance would be to defend rupee in the global market and curb inflation at home, say experts.