Strong demand remained the main driver of manufacturing activity in India even as industrial activity expanded at the slowest rate in five months in September, according to figures from a private poll released on Tuesday.

S&P Global’s Manufacturing Purchasing Managers’ Index decreased from 58.6 in August to 57.5 in September. For 27 consecutive months, the PMI level has been over the 50-level threshold.

According to Pollyanna De Lima, associate director of economics at S&P Global Market Intelligence, “India’s manufacturing industry showed mild signs of a slowdown in September, primarily due to a softer increase in new orders which tempered production growth.” However, there was a noticeable increase in both demand and output, and businesses also reported an increase in new business from clients in Asia, Europe, North America, and the Middle East.

Due to the robust demand from both domestic and foreign markets, industries reported a large increase in new orders and production in September. For the 18th consecutive month, demand on the global market increased.

According to the survey, this increase in demand encouraged enterprises to have a positive perspective, which resulted in the greatest level of company confidence in nine months.

Additionally, it prompted businesses to increase employee hiring, with the employment index rising to its highest level since November. The employment indicator has maintained above 50 for six straight months despite the modest expansion pace.

Participants observed decreased prices for gasoline and aluminium, which led to a modest increase in input costs in September – at the slowest rate in more than three years.

Strong demand, however, forced businesses to increase their selling prices. The increase in the output charges index was caused by increasing labour expenses, and the rate of growth was higher than typical over the long run, signalling increased concerns about inflation.

De Lima continued, “The significant rise in output charges signalled by the PMI data, which occurred despite a notable retreat in cost pressures, could limit sales in the coming months.”

According to official statistics released on Tuesday, September 5, the S&P Global India services Purchasing Managers’ Index (PMI) previously lost some momentum in August when it dropped to 60.1 but overall conditions remained strong amid increased inflationary pressures. According to the report, exports reached a record high due to strong international demand.