The latest data suggested, however, that January's increase in employment was insufficient to reduce the pressure on manufacturers' capacity.

This was highlighted by a further accumulation of backlogs of work at factories, the third in as many months. Moreover, the rate of increase accelerated to its highest since March 2015. Price pressures remained on the upside at the start of  2016,  with  input  costs  and  output  charges  both rising  during  January. Companies indicated that higher demand for raw materials had led to a number of cost increases. However, the rate of input cost inflation eased slightly and stayed below the long-run survey average.

Factory gate prices rose for the fourth successive month in January, with the rate of increase ticking up to a 14-month high. Survey respondents reported that charges had been raised in order to pass on part of the increase in purchasing costs.

January saw a modest increase in stocks of purchases, mainly the result of a further rise in the level of input buying activity. In contrast, inventories of finished products fell again.

Commenting on the Indian Manufacturing PMI survey data, Pollyanna De Lima, Economist at Markit and author of the report, said: "The opening month of 2016 saw a rebound in new business - from both domestic and external clients - leading manufacturers in India to scale up output following a short-lived downturn recorded in December. Whereas the trends in the growth rates are relatively weak in comparison with the long-run series averages, January's PMI data paint a brighter picture of the Indian economy.

"Although the RBI is likely to continue its monetary policy loosening cycle in 2016, February's meeting will probably see the repo rate remain unchanged at 6.75% as the central bank will remain wary of inflationary pressures building in the country."
END