The seasonally adjusted Nikkei India Manufacturing Purchasing Managers' Index (PMI) edged higher in June, posting 51.7 (May 50.7).

Supported by a stronger increase in new business inflows, Indian manufacturers raised production at a faster rate during June. The favourable operating environment encouraged businesses to purchase additional inputs, but was insufficient to generate jobs. Meanwhile, cost inflation eased, while output charges were broadly unchanged.

The main contributing factors to the upward movement in the PMI were stronger rates of growth in new orders and output, both of which reached three-month highs in June. Incoming new work rose across the three broad areas of the manufacturing economy, as did production. The best-performing category was consumer goods.

Offsetting the decline seen in May, the first in 32 months, new export orders increased in June. However, the rate of expansion was only slight and below the long-run series average. Two of the three monitored market groups recorded higher levels of new business from abroad, the exception being intermediate goods.

Boosted by sustained growth of order books, buying levels rose in June. Despite being slight, the rate of expansion was the quickest in the current six-month sequence of increases. Purchasing activity grew in each of the three sub-sectors, led by consumer goods.

Data implied that the upturn in buying levels placed pressure on the capacity of vendors, as average delivery times lengthened to the greatest extent since April.

June saw input costs increase for the ninth month running, with survey participants reporting higher prices paid for metals, chemicals, plastics, textiles, petrol, food and paper. That said, the rate of inflation eased to the slowest since March, and was moderate overall.

Concurrently, factory gate charges were broadly unchanged in June. Where average selling prices remained the same as in May, at 95% of firms, panellists reported efforts to remain competitive.

There was broadly no change to manufacturing employment in India during June, with some panellists reporting sufficient staff to work on both new and existing projects and others noting shortages of skilled labour in the country. Finally, there were diverging trends with regards to stock levels in June, as post-production inventories dipped and holdings of purchases increased.

Commenting on the Indian Manufacturing PMI survey data, Pollyanna De Lima, Economist at Markit and author of the report, said, ''Indian factories registered a welcome upturn in growth of both production and new orders mid-way through 2016, but producers clearly remain stuck in a low gear. Rates of expansion remain weak by historical standards, with the PMI average for April June being lower than that seen in the prior quarter and thereby signalling a softer contribution from the sector to overall GDP during this period.

The domestic market continues to be the main growth driver, as the Indian economic upturn provides a steady stream of new business. Nonetheless, there were also signs of an improvement in overseas markets, as new foreign orders rose in June following a decline in May. However, it looks as if lacklustre global demand remains a headwind for Indian manufacturers.

Sustained growth of output and order books failed to encourage producers to raise employment. In fact, it has been roughly three years since the sector has seen any meaningful job creation.

Another key aspect from the latest PMI results is the trend in prices. Purchasing cost inflation softened, while selling prices were broadly unchanged. This lack of inflationary pressures provides the RBI with further leeway to boost economic growth through cutting its benchmark rate.''