India's manufacturing-sector activity expanded at its fastest pace in a year in February, providing some relief to the South Asian economy that has been struggling with high inflation and weak growth.
The seasonally adjusted HSBC HSBA.LN -1.34% India Manufacturing Purchasing Managers' Index, prepared by Markit, rose to 52.5 from 51.4 in January, according to a survey released Monday. A reading above 50 indicates expansion while one below shows contraction.
HSBC said a bigger increase in new orders, both from the export and home markets, helped drive the expansion. The consumer goods segment was the best performer.
"New order flows have firmed, with the improvement in external demand and the reduction in macroeconomic uncertainty since last summer," said Leif Eskesen, HSBC's chief economist for India and Asean. "This, in turn, has provided a lift to output growth," he added.
Rising borrowing costs, bureaucratic red-tape, infrastructure bottlenecks and the slow pace of change in policies needed to address these issues have hurt Indian manufacturing, dragging economic growth to its weakest levels in a decade.
Data Friday showed India's manufacturing output during the last quarter of 2013 contracted 1.9% from a year earlier. That dragged the economy, which grew just 4.7% in that quarter, the seventh successive month of below-5% growth.
Inflation, too, has remained uncomfortably high for years now in Asia's third-largest economy, creating the risk of stagflation.
Although price rises have eased in recent months, they still remain well above levels conducive to facilitating growth. "Underlying inflation pressures remain potent, which was evident from the jump in the input price component of the PMI survey," Mr. Eskesen said. "This will keep the RBI (Reserve Bank of India) hawkish and likely compel it to raise rates a bit further this year," he added.
That could spell bad news for Indian industry, which has been urging the central bank to not only halt the rate increases but also to adopt a more dovish stance and bring them down to facilitate an economic recovery.
Still, the RBI has been raising interest rates as it believes inflation could be a bigger threat to India's growth if allowed to persist for too long.
Late January, it increased the main lending rate for the third time since September.
India's consumer inflation was at 8.79% in January. The RBI wants to bring it down to 8% by next January and 6% in the following 12 months.
The seasonally adjusted HSBC HSBA.LN -1.34% India Manufacturing Purchasing Managers' Index, prepared by Markit, rose to 52.5 from 51.4 in January, according to a survey released Monday. A reading above 50 indicates expansion while one below shows contraction.
HSBC said a bigger increase in new orders, both from the export and home markets, helped drive the expansion. The consumer goods segment was the best performer.
"New order flows have firmed, with the improvement in external demand and the reduction in macroeconomic uncertainty since last summer," said Leif Eskesen, HSBC's chief economist for India and Asean. "This, in turn, has provided a lift to output growth," he added.
Rising borrowing costs, bureaucratic red-tape, infrastructure bottlenecks and the slow pace of change in policies needed to address these issues have hurt Indian manufacturing, dragging economic growth to its weakest levels in a decade.
Data Friday showed India's manufacturing output during the last quarter of 2013 contracted 1.9% from a year earlier. That dragged the economy, which grew just 4.7% in that quarter, the seventh successive month of below-5% growth.
Inflation, too, has remained uncomfortably high for years now in Asia's third-largest economy, creating the risk of stagflation.
Although price rises have eased in recent months, they still remain well above levels conducive to facilitating growth. "Underlying inflation pressures remain potent, which was evident from the jump in the input price component of the PMI survey," Mr. Eskesen said. "This will keep the RBI (Reserve Bank of India) hawkish and likely compel it to raise rates a bit further this year," he added.
That could spell bad news for Indian industry, which has been urging the central bank to not only halt the rate increases but also to adopt a more dovish stance and bring them down to facilitate an economic recovery.
Still, the RBI has been raising interest rates as it believes inflation could be a bigger threat to India's growth if allowed to persist for too long.
Late January, it increased the main lending rate for the third time since September.
India's consumer inflation was at 8.79% in January. The RBI wants to bring it down to 8% by next January and 6% in the following 12 months.
Source: Hindi News
No comments:
Post a Comment