The health of India's manufacturing sector improved for the third straight month in March, and to the greatest extent since October 2016. Incoming new orders expanded at a stronger pace, thereby leading to quicker increases in production and input purchasing. Moreover, firms hired additional employees to cope with greater workloads.

Although both input costs and output charges rose further, inflation rates softened from those seen in February.

Rising to a five-month high of 52.5 in March, from 50.7 in February, the seasonally adjusted Nikkei India Manufacturing Purchasing Managers' Index (PMI) - a composite indicator designed to provide a single-figure snapshot of the performance of the manufacturing economy - indicated that operating conditions in the sector improved to a greater extent. As for the January-to-March quarter, the PMI average (51.2) was the lowest seen since Q1 FY 2016/17 (51.0).

Indian manufacturers purchased greater quantities of inputs for use in the production process during March, with the latest upturn in buying levels the strongest in the current three-month sequence of expansion.

Business confidence among manufacturers improved in March, with almost one-fifth of panellists expecting output levels at their units to be higher in 12 months' time. Forecasts of a pick-up in demand and the launch of new product lines were the main factors underpinning optimism.

Reversing the decline noted in February, manufacturing jobs rose in March as some firms took on extra staff in line with efforts to expand capacity.

Commenting on the Indian Manufacturing PMI survey data, Pollyanna De Lima, Economist at IHS Markit and author of the report, said: "PMI data for March reveal positive developments in the Indian manufacturing sector. Rates of expansion in factory orders and production accelerated again, encouraging some companies to scale up their input buying and take on additional workers."

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Sources: Nikkei, IHS Markit