The health of India's manufacturing economy improved further at the end of the year, as companies continued to scale up production and employment in response to strong inflows of new business. December data also brought news of a notable slowdown in input cost inflation, to a 34-month low, which translated into broadly no change in factory gate charges.

Posting 53.2 in December, from 54.0 in November, the Nikkei India Manufacturing Purchasing Managers' Index® (PMI®) was consistent with a further improvement in operating conditions across the sector. The latest figure was the second greatest in 2018 and contributed to highest quarterly average since Q3 FY 2012. Growth of new work remained robust at the end of the quarter, with the upturn the second-quickest since December 2017. Companies that experienced greater inflows of new orders mentioned expanded client bases, stronger demand and fruitful advertising. International markets contributed to sales growth, with exports rising for the fourteenth month in a row. Despite easing from November, the rise in production was among the quickest seen in 2018.

Firms suggested that greater sales and technological progress supported the increase in output. Growth was curtailed by competitive pressures, labour issues and challenging public policies.

Employment continued to expand in December, but companies still signalled increased volumes of work-in-hand. The upturn in jobs was the slowest in four months, while backlogs were accumulated to the quickest extent since May. Holdings of manufactured goods in India decreased again at the end of the year as firms sought to fulfil orders from stocks. The pace of depletion was solid and the joint-fastest in three months.

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