Cost squeezes India manufacturing: HSBC

“The most attention-grabbing aspect of the March PMI release was the surge in input prices to a new series high,suggesting that companies are facing sizable and mounting cost pressures,” said Robert Prior-Wandesforde,senior Asian economist at HSBC.

“The survey also indicates that manufacturers are becoming more willing to pass on some of these increases in the form of higher output prices,” he added.

The new orders index fell to 62.7 from February’s 64.0.

“While the results were no doubt impacted by the one-off duty hikes announced in the budget,the RBI can’t afford to ignore the situation,particularly as more respondents are pointing to supply-side capacity pressures,” Prior-Wandesforde said.

“We believe the central bank has plenty of catching up to do if it is to deal with the rapid escalation of price risks in the economy,” he said.

Headline wholesale price index inflation touched 9.89 per cent in February and analysts expect the index to reach double digits in March. A pick-up in economic growth could keep it high in the coming months.

The Reserve Bank of India last month raised key interest rates by 25 basis points,the first time since it has tightened policy after it began cutting rates in 2008,citing intensifying inflationary pressures and steady economic recovery.