Indian manufacturing returned to growth last month as a strong rise in orders pushed factories to step up production,a business survey showed on Monday,suggesting a slow economic recovery is on its way.
An expansion in manufacturing can only boost optimism after data on Friday showed Asia’s third-largest economy grew at a higher-than-expected rate in the three months through September.
The HSBC Manufacturing PMI,compiled by Markit,rose to 51.3 in November from October’s 49.6.
The PMI index is the highest since March and marks its first time above the watershed level of 50 that divides growth from contraction in four months.
“Manufacturing activity picked up,led by a rise in new domestic orders,which helped pull up output growth,” said Leif Eskesen,chief economist for India at survey sponsor HSBC.
Offering hope that softness in domestic demand may be leveling off,overall orders grew for the first time in six months despite demand for the country’s exports easing off.
The new orders sub-index rose to 51.9 last month,its highest since April. In October it shrank to 48.9.
Such strong demand augurs well and will be welcome news for a government losing popularity ahead of an election next year because of slowing growth and stubbornly high inflation.
The survey pointed to some good news on inflation as well,bringing relief to the Reserve Bank of India,which hiked interest rates by 25 basis points at back-to-back meetings to curb rising prices,taking the policy repo rate to 7.75 percent.
Both input and output costs rose at a softer pace in November,the survey showed.
HSBC’s Eskesen said the RBI would be getting closer to the end of its tightening cycle if the trend of easing inflation continues.
“Although it (RBI) may still need to notch rates up a bit further,” he added.
India’s manufacturing PMI expands in Nov: HSBC
India’s manufacturing sector activity witnessed an expansion in November for the first time since July,driven by rising new domestic orders,an HSBC survey said today.
The HSBC India Manufacturing Purchasing Managers’ Index (PMI) for the manufacturing industry climbed from 49.6 in October to 51.3 in November on the back of a rebound in new orders and output.
This was the first manufacturing PMI reading above 50.0 since July and is the highest in seven months.
The PMI reading of above 50 differentiates growth from contraction.
“Manufacturing activity picked up,led by a rise in new domestic orders which helped pull up output growth,” HSBC Chief Economist for India and ASEAN Leif Eskesen said.
Meanwhile,according to official data released last Friday,the second quarter GDP figure is also an indication of an economic recovery.
After sluggish growth in the first quarter,Indian economy grew by 4.8 per cent in the second quarter this fiscal due to improved performance of farm,manufacturing,construction and services sectors.
HSBC further noted that manufacturing production rose for the first time in seven months during November. Moreover,the rise in new work intakes ended a five-month period of contraction.
Meanwhile,export business increased at a marginal and slower rate,suggesting that the domestic market was the main source of new order gains.
According to HSBC,inflationary pressures in the Indian manufacturing economy softened in November.
“Encouragingly,input and output price inflation eased,which,if sustained,could imply that the RBI is getting closer to the end of its tightening cycle,although it may still need to notch rates up a bit further,” Eskesen said.
The Reserve Bank had hiked policy interest rates by 0.25 per cent each in September and October to bring down the stubbornly high inflation.
The Wholesale Price Index (WPI) based inflation stood at 8-month high of 7 per cent in October,while the retail inflation,based on Consumer Price Index (CPI),swelled to 10.09 per cent during the month,mainly on account of high food prices.