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The HSBC Manufacturing Purchasing Managers'
Index (PMI), compiled by Markit, edged up to 51.4 in May from
51.3 in April.
Still, that was slightly below the 51.6 median forecast in a
Reuters poll. A figure above 50 indicates monthly expansion.
The new orders sub-index, which includes domestic demand as well
as orders from abroad, rose to 53.2 in May, a three-month high,
from 52.5. A rise in the new orders index often is followed by
better output in following months.
"The momentum in the manufacturing sector improved at the
margin, thanks to higher domestic and export order flows," said
Frederic Neumann, Co-Head of Asian Economic Research at HSBC.
Indian firms also hired more staff in May.
Manufacturing output in India, which accounts for about 16
percent of the overall economy, has been languishing of late.
The PMI sub-index for output has fallen around 7 percentage
points compared with two years ago.
A prolonged slowdown in output from mines, utilities and
factories has severely hurt growth.
India's stock market is trading near a record high on
expectations that a government led by newly-elected Prime
Minister Narendra Modi, India's first majority government in
three decades, will help bring the economy out of its torpor.
Some companies reported that India's elections, which took place
over most of April through the first half of May, hindered
output growth.
But the latest PMI data show that India, now growing below 5
percent on an annual basis, is still grappling with an inflation
challenge.
Input prices, the cost of raw materials that factories buy, rose
at their slowest pace in over a year.
The increase in prices factories charge for their goods
accelerated in May, although Markit noted that a very small
proportion of companies surveyed actually raised prices, mainly
in consumer goods industries.
The Reserve Bank of India is expected to leave its benchmark
interest rates on hold when it meets on June 3, according to a
Reuters poll.
(Reporting by Sumanta Dey; Editing by Ross Finley & Kim Coghill)
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