The manufacturing sector in India continued its growth momentum in August, with the country's Purchasing Managers' Index reaching 57.5, marginally dipping from 58.1 in July. 

The latest India's manufacturing PMI report compiled by S&P Global and HSBC noted that Indian manufacturers registered softer increases in new business and output during August, albeit with rates of expansion remaining elevated by historical standards. 

According to S&P Global, any PMI level above 50 signals expansion of the manufacturing sector, while a figure below 50 denotes contraction. 

Indian Manufacturing Sector Continues Expansion

According to the report, business confidence retreated in August, but firms scaled up buying levels in a bid to safeguard against input shortages. The latest upturn in pre-production inventories was one of the strongest seen in 19-and-a-half years of data collection.

"The Indian manufacturing sector continued to expand in August, although the pace of expansion moderated slightly. New orders and output also mirrored the headline trend, with some panellists citing fierce competition as a reason for slowdown," said Pranjul Bhandari, Chief India Economist at HSBC. 

She added: "Nevertheless, all three indicators remain well above their historical averages. On a positive note, the rise in input costs slowed sharply." 

Input Price Inflation Softened in August 

The report further noted that moderation in cost pressures supported the rise in purchasing activity in August. 

Moreover, the rate of input price inflation softened to the slowest in five months. Concurrently, demand resilience meant that firms were comfortably able to share additional cost burdens with their clients by lifting selling prices.

"Manufacturers increased their raw material buying activity in order to build safety stocks. In line with input costs, the pace of output price inflation also decelerated, but the deceleration was to a much smaller extent, thereby increasing margins for manufacturers," said Bhandari. 

She added: "Business outlook for the year ahead moderated slightly in August, driven by competitive pressures and inflation concerns."