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Indian factory growth bucks Asia trend, speeds to 6-month high in July: PMI

A worker grinds a piece of metal to be used in a submersible pump at a manufacturing unit in Ahmedabad, India.

[NEW DEHLI] Indian manufacturing activity expanded at its fastest pace in six months in July as new export orders accelerated, a business survey showed on Monday.

The Nikkei Manufacturing Purchasing Managers' Index , compiled by Markit, rose to 52.7 in July from June's 51.3, bucking weakness seen across much of the rest of Asia. The 50-mark demarcates contraction from expansion. "This reflects stronger increases of new orders and output. Furthermore, the sector was also boosted by the quickest expansion in export orders since February," said Pollyanna De Lima, economist at Markit.

A Reuters poll last week predicted the PMI would dip slightly to 51.0. Firms resisted passing on higher raw material costs to customers, which will be good news for the Reserve Bank of India ahead of its next policy review on Tuesday. It is expected to leave interest rates on hold.

Retail inflation in June crept to an eight-month high but remains far from the double-digit levels less than two years ago and within the RBI's target of 2 to 6 per cent.

The new export orders sub-index jumped to 54.5 from 51.8, the highest reading in five months, which coupled with a similar increase in domestic orders suggests renewed demand for Indian goods both home and abroad.

But a Reuters poll last month suggested India's economic growth prospects have dimmed due to delays in passing reforms through parliament. "Although the latest data suggest that the manufacturing upturn gained traction, worries regarding the labour market persist," Mr De Lima said.

Staffing levels were cut for a fourth month, the survey showed.