Manufacturing activity posts strongest growth in a year

New Delhi, March 4 –  Manufacturing activity in the country gathered pace in February on the back of new domestic and overseas orders to post the fastest expansion in nearly a year, a survey showed on Monday.

 

The HSBC India Purchasing Managers' Index (PMI) rose to 52.5 in February, up from 51.4 in the previous month, signalling robust improvement in business conditions across the sector. Production growth accelerated due to an increase in new work. New orders increased for the fourth month running and the fastest since February 2013, the survey showed.

 

"Manufacturing activity picked up further in February. New order flows have firmed, with the improvement in external demand and the reduction in macroeconomic uncertainty since last summer," said Leif Esekesen, chief economist for India & Asean at HSBC.

 

"However, the recovery in activity is still likely to prove protracted, given the lingering structural constraints. Moreover, underlying inflation pressures remain potent, which was evident from the jump in the input price component of the PMI survey. This will keep Reserve Bank of India (RBI) hawkish and likely compel it to raise rates a bit further," Eskesen said.

 

The country's manufacturing sector has been under intense pressure and has been a drag on the overall growth, which is expected to slow to 4.9% in the fiscal year ending March 2013.

 

High interest rates, stubborn inflation, slowing investment and a global economic slowdown have hurt the manufacturing sector, while policy and regulatory delays have acted as a major hurdle.

 

Latest data showed growth in the eight key infrastructure industries slowed to 1.6% in January pointing to more pain for the overall industrial sector. The PMI is seen as an advance indicators and should provide some relief to policymakers battling to breath fresh life into the manufacturing sector to boost growth.

 

The government has set up a panel to approve stalled projects and it is expected to yield results in the months ahead. According to the PMI survey, consumer goods was again the best performing sub sector of the manufacturing economy in February, leading the rise in both output and new orders.

 

The survey showed that manufacturing employment increased, stretching the current period of job creation to five months. Input cost inflation quickened to its highest in four months during February. Anecdotal evidence pointed to increased metals, chemicals, textiles and energy costs. All three monitored market sectors recorded sharp increases in purchase prices, the survey showed.

 

TOI