NEW DELHI: India’s manufacturing activity picked up a tad in May, matching October levels, suggesting sluggish industry might be responding to an overall improvement in operating conditions.

The seasonally adjusted Nikkei India Manufacturing Purchasing Managers Index rose to 50.7 compared with 50.5 in April and matched the October 2015 level. “The headline PMI remained in expansion territory but recorded one of its lowest readings since the end of 2013, suggesting that the sector is barely improving,” said Pollyanna De Lima , Economist at Markit , which compiles the survey.

A reading above 50 on the index denotes expansion.

Data released by the statistics office on Tuesday showed that manufacturing grew 9.3% in 2015-16. Following broadly stagnant levels in April, order book volumes increased during May. Data showed that growth was centred on the domestic market as new business from abroad decreased. Demand was subdued and new export orders fell for the first time in 32 months.

“Signs of challenging economic conditions in the Indian manufacturing sector were evident in May, with output losing further growth momentum,” said De Lima.

Sub sector data highlighted intermediate goods as the best performing category in May, where growth rates for new orders and output were stronger than those seen among consumer goods producers. Investment goods firms, in contrast, saw further declines in new work and production. Tepid demand and an increasingly competitive environment appears to have restricted pricing power among producers, as output charges were raised only marginally despite cost inflation climbing to a 14-month high. Higher production was associated with an increase in the order books but growth was hampered by Assembly elections in certain regions.

On employment front, the survey said there was an expansion in workforce sizes but the rate of job creation was only marginal. De Lima noted that further stimulus may be necessary to shift the economy into a higher gear since “so far, there is little evidence that the latest cut in the benchmark rate acted to significantly improve business conditions for manufacturers”.