India's factory growth softened for the second month in October

Bengaluru: India's manufacturing growth slowed for a second straight month in October as demand eased, which alongside bigger increases in the cost of raw materials had an impact on business confidence, a private survey showed.

The Manufacturing Purchasing Managers' Index, compiled by SP Global, dropped to an eight-month low of 55.5 in October from 57.5 in September, confounding expectations in a Reuters poll for an uptick to 57.7.

That did, however, mark the 28th consecutive month the index has been above the 50-mark separating expansion from contraction.

A recent Reuters poll showed demand during the festive season would bring some cheer to the economy but would not be enough to ramp up the speed of what is already the world's fastest-growing major economy.

"India's manufacturing sector generated substantial growth in October, despite a challenging global economic environment," noted Pollyanna De Lima, economics associate director at SP Global Market Intelligence.

"Still, insights from surveyed purchasing managers pointed to the deceleration of several measures."

The slowdown was mainly led by the consumer goods category.

Growth in demand lost momentum again and the new orders sub-index fell to its lowest in a year. The expansion in international demand slowed to a four-month low.

Concerns around demand and inflation dampened business confidence in October. The future output sub-index fell to its weakest since May after touching a nine-month high in September.

Input prices ticked higher last month, leading companies to pass on some of the extra costs to clients, although the rate of increases in selling prices decelerated.

"Qualitative evidence from the future output question revealed an interesting finding, as reports of rising inflation expectations were expected to dent demand and subsequently production growth over the course of the coming 12 months," added De Lima.

Inflation is expected to average 5.5 per cent this fiscal year that ends in March 2024 and ease to an average 4.8 per cent in fiscal 2025, the latest Reuters survey found.

India's central bank was expected to leave its repo rate unchanged at 6.50 per cent until at least mid-2024, with the first 25 basis point cut forecast to come in the July-September quarter, Reuters poll medians showed.