KOLKATA: Operating conditions in the manufacturing sector of India saw “a solid improvement” during August while those in China “stagnated”, global economy tracker IHS Markit said on Monday.

Based on data collected over August 12-24, the London-based firm said Indian manufacturers raised output during this time period after demand from domestic and external markets picked up.

“Firms recorded an easing in cost inflation during the month, which in turn resulted in a softer overall increase in factory gate charges,” IHS Markit said.

Consequently, the company’s Purchasing Managers’ Index for Indian manufacturing – a composite single-figure indicator of the sectoral performance – was at a 13-month high, which “showed a solid improvement in the health of the sector”.

“Operating conditions” refer to business factors that impact any sector, and include determinants such as overall demand, input costs, inventory, production capacity and payroll numbers.

IHS Markit economist Pollyanna De Lima said the country’s central bank, the Reserve Bank of India, had room to loosen monetary policy at its next meeting to support economic growth.

“We forecast a robust 7.5 per cent increase in real GDP during the fiscal year 2016-17,” De Lima said.

The analysts said a “sharp upturn in new business inflows, which expanded at the fastest pace since December 2014”, contributed to robust operating conditions in Indian manufacturing.

Consumer goods producers led the increase, although solid growth was also seen in the intermediate and capital goods categories.

China slowdown

On the other hand, it said operating conditions “stagnated” across China’s manufacturing sector during the month after a marginal improvement in July.

“Production and total new orders both rose at slower rates, while export sales continued to decline. Job shedding meanwhile persisted.”

This in turn contributed to a further rise in backlogs of work. Markit noted that price pressures eased, although the prices charged by the manufacturers increased at weaker rates than seen in July.

“Government support to stabilize growth must continue,” said Zhengsheng Zhong, director of macroeconomic analysis at the CEBM Group.

“Downward pressure on China’s economy remains,” Zhong added.

IHS Markit releases monthly reports on the state of the manufacturing and services sectors of various countries a few days before their respective governments do. It, however, does not prepare similar reports for Pakistan.