Manufacturing sector activity cooled to a three-month low in May despite an upturn in factory orders, according to a monthly survey.

The Nikkei Markit India Manufacturing Purchasing Managers’ Index (PMI) fallen to 51.6 in May from 52.5 in April. Despite being above the no-change mark of 50, the PMI was the lowest in three months, but indicated expansion for the fifth straight month.

A reading above 50 on the index denotes expansion, while that below indicates contraction.

“The upturn in the Indian manufacturing sector took a step back in May, with softer demand causing slower expansions in output and the amount of new work received by firms,” said Pollyanna De Lima, Economist at IHS Markit and author of the report, noting that there was also a fresh decline in new export orders.

The data comes just a day after official estimates pegged gross value added in the economy in the fourth quarter of last fiscal at a mere 6.1 per cent. It is likely to add to calls for a cut in key rates in the second bi-monthly monetary policy on June 6 and 7.

The Reserve Bank of India in its last monetary policy review meet on April 6 had maintained the repo rate at 6.25 per cent, but increased reverse repo rate to 6 per cent from 5.75 per cent.

The PMI data showed that incoming new work rose at the weakest pace since February. There was a marginal decline in the capital goods segment and there was also a slowdown in the consumer and intermediate goods categories.

On price rise, the survey said the rate of inflation softened to become the slowest in eight months. More worryingly, manufacturing jobs in India decreased in May.

“The fall in staff numbers was centred on the intermediate goods category, with marginal growth noted elsewhere,” said the release.

But business confidence was high in May and reached a six-month peak.