October PMI at 54.4; hits a 22-month high

Purchasing Managers Index (PMI), an indicator of economic health of the manufacturing sector of a country has risen to a 22-month high in October 2016 at 54.4 as against 52.1 achieved in the previous month i.e September.

A reading above 50 indicates economic expansion, while one below 50, points towards a contraction. Indian PMI has shown a continued rising trend over the past months owing to higher manufacturing activities in the country.

PMI is an economic indicator derived from monthly surveys of private sector companies. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.

Latest PMI helps reinforce the view that Asia's third largest economy is growing at a brisk pace, but it could also point to risks of inflation gathering steam, and crimping the Reserve Bank of India's room to ease policy further.

"The sector looks to be building on the foundation of the implied pick-up in growth in the previous quarter," said Pollyanna De Lima, economist at survey compiler IHS Markit.

Good set of PMI was also helped by huge festive demand in the domestic market aided by RBI bringing the borrowing cost down.