The S&P Global India Manufacturing Purchasing Managers' Index (PMI) fell in June to 53.9, the weakest pace of growth since last September, from 54.6 a month ago.
This is the 12th consecutive 50 plus print for the manufacturing PMI. A reading above 50 indicates expansion in activity, while a sub-50 print is a sign of contraction.
"The economic recovery of the Indian manufacturing sector continued in June, aided by robust domestic and international client demand," S&P Global said. "However, growth of total sales and production eased amid intense price pressures."
Softer increases in production, factory orders, stocks of purchases and employment dragged down the print in June. The rates of expansion of factory orders and production rose eased to nine-month lows, it added.
India’s economy is recovering from the pandemic-led sharp contraction a couple of years ago. The central bank expects economy to expand 7.2 percent this fiscal year. However, the economy is facing headwinds from global macroeconomic and financial market volatility which have pushed the rupee to record lows. Inflation also continues to remain above target, pushing the central bank to hike policy rates.
In June, purchase price and output charge inflation retreated to three-month lows, but remained above their respective long-run averages, S&P Global said.
Companies said higher input cots — including for chemicals, electronics, energy, metals and textiles — which they partly passed on to clients, it added.
Meanwhile, sentiment slipped to a 27-month low with fewer than 4 percent of panellists forecasting output growth in the year ahead, while the vast majority expecting no change from present levels.
"There was a broad-based slowdown in growth across a number of measures such as factory orders, production, exports, input buying and employment as clients and businesses restricted spending amid elevated inflation,” Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said.“There was positive news regarding supply chains, with the latest results showing the first shortening of input lead times since the onset of COVID-19. This seemed to have curbed the upward pressure on input costs, with purchase prices and output charges increasing at sharp but slower rates during June. Companies nevertheless remained very concerned about inflation, a key factor that dragged down business confidence to a 27-month low."