Growth in India's factory activity slowed to a four-month low in January as COVID-19 curbs hurt new orders and output, while high price pressures weighed on business confidence about the year ahead, a business survey showed.
The Manufacturing Purchasing Managers' Index, compiled and collected by IHS Markit from Jan. 12-25, fell to 54.0 in January from December's 55.5.
While the latest reading is slightly lower than the 54.6 expected in a Reuters poll of economists, the index was firmly above the 50 mark that separates growth from contraction for a seventh month.
That adds to evidence that the Omicron coronavirus variant will likely exert less of a drag on Asia's third-largest economy compared with the devastating Delta variant.
"The latest PMI results indicated that the new wave of COVID-19 had a mild impact on the performance of the Indian manufacturing sector," Pollyanna De Lima, economics associate director at IHS Markit, said in a release.
"A number of measures such as output, new orders and input buying remained in expansion mode. Although growth rates eased, they were historically strong."
The new orders sub-index, a proxy for domestic demand, fell to 56.6 from December's 58.4, its lowest since September, leading firms to reduce their workforce for a second straight month.
Manufacturing output growth also eased to a four-month low.
The business expectations index, which measures optimism about the year ahead, sank to a 19-month low in January amid ongoing concerns surrounding the pandemic and elevated price pressures.
While input cost inflation eased for a third month in January, it remained high and businesses passed on some of the higher prices to consumers, suggesting the spectre of higher inflation is here to stay.
That may add pressure on the Reserve Bank of India to tighten monetary policy sooner than expected, like some other central banks.
"Survey participants were concerned that production growth would be hampered by inflationary pressures, the escalation of the pandemic and any new restrictions it would bring," De Lima added.
