India's manufacturing activity improved again in August, although S&P Global's Purchasing Managers' Index (PMI) edged down to 56.2 from the eight-month high of 56.4 recorded in July.
A reading above 50 indicates expansion in activity, while a sub-50 print is a sign of contraction.
This is the 14th consecutive 50-plus print for the manufacturing PMI.
"A sustained improvement in demand conditions boosted new order intakes at Indian manufacturers during August, which in turn pushed output growth to a nine-month high," S&P Global said.
"Production volumes were also supported by a pick-up in exports and upbeat projections for the year-ahead outlook. Firms were at their most optimistic for six years."
A bright outlook for international demand is curious considering economists expect global growth to deteriorate rapidly, with several developed economies seen falling into a recession.
Surveyed firms also expressed optimisim on the prices front.
"Firms welcomed the weaker increase in input costs with and upward revision to output forecasts amid renewed hopes that contained price pressures will help boost demand," noted Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.
"Inflation concerns, which had dampened sentiment around mid-year, appear to have completely dissipated in August," De Lima added.
S&P Global's survey found cost inflation declined to a one-year low in August, thanks to the fall in commodity prices, particularly those of aluminium and steel. Consequently, selling prices only rose moderately.
The easing of price concerns will be music to the Reserve Bank of India's (RBI) ears, with elevated inflation having already forced the Monetary Policy Committee (MPC) to raise the policy repo rate by 140 basis points to 5.4 percent in just four months.
While India's key inflation rate, measured by the Consumer Price Index (CPI), eased to a five-month low of 6.71 percent in July, it has been above the medium-term target of 4 percent for 34 consecutive months while also spending seven straight months above the 6 percent upper-bound of the central bank's 2-6 percent tolerance range.
If average CPI inflation is outside the 2-6 percent range again in July-September - as the RBI has forecast - it will mean the central bank would have failed to meet its inflation mandate.
The MPC, scheduled to next meet September 28-30, is widely expected to announce a couple of more rate hikes to take the repo rate to around 6 percent by the end of 2022.
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