The seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI) last month fell to 55.1 from 56.2 in August. This is the fifteenth straight month of expansion in manufacturing activity.

This comes after the Reserve Bank of India (RBI) last week slashed the real gross domestic product (GDP) projection for FY23 to 7 per cent from to 7.2 per cent announced in August, due to risks posed by geopolitical tensions, tightening global financial conditions and a possible decline in the external component of aggregate demand.

The PMI data, released at the beginning of every month, is an economic indicator, which shows the prevailing direction of economic trends in the manufacturing and services sector. It is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. A reading above 50 indicates an overall expansion compared to the previous month, and below 50 reflects contraction in manufacturing activities.

The survey showed that despite the fall, the September PMI data indicated a strong improvement in the health of the manufacturing industry, as companies ramped up production in tandem with a sustained rise in new work intakes. Rates of expansion remained historically high, despite easing from August.

“The latest set of PMI data show us that the Indian manufacturing industry remains in good shape, despite considerable global headwinds and recession fears elsewhere,” said Pollyanna De Lima, economics associate director, S&P Global Market Intelligence.

During the month, there was a softer but substantial increase in new orders and production, with some leading indicators suggesting that output looks set to expand further at least in the short-term as firms seek to fulfil sales contracts and replenish stocks, De Lima noted.

Factory orders continued to increase at the end of September, stretching the current sequence of expansion to 15 months. However, the growth was weakest since June.

Goods producers enjoyed a weaker inflationary environment during the reporting month as input costs rose at the slowest pace since October 2020.

While around 8 per cent of companies reported higher purchasing prices, 91 per cent signalled no change, the survey said.

“The overall level of positive sentiment seen in September was the best in over seven-and-a-half years. That said, currency risks and the impact of a weaker rupee on inflation and interest rates could derail optimism during October,” De Lima said.

In the monetary policy announced last week, the Reserve Bank of India (RBI) raised the repo rate by 50 basis points (bps) to 5.90 per cent to tame inflation, which is outside its comfort zone of 2-6 per cent. With this, the RBI has effectively increased repo rate by 190 bps. It retained inflation projection at 6.7 per cent for the current financial year.

So far in this fiscal, the rupee has fallen around 8 per cent against the US dollar. The RBI has been selling dollars to curb excessive volatility in the rupee. Since April this year, the country’s foreign exchange reserves have fallen by $68.95 billion. RBI Governor Shaktikanta Das had last Friday said that about 67 per cent of the decline in reserves during the current financial year was due to valuation changes arising from an appreciating US dollar and higher US bond yields.