Manufacturing growth set for a slowdown

The Reserve Bank of India (RBI) on Monday said that despite an improvement in the operating environment, performance of the manufacturing sector is expected to be lower in the April-June 2008 quarter (Q1) compared with that in the same period of 2007.

Referring to its industrial outlook survey conducted in 2008, the central bank said a significantly higher proportion of respondents expected a decline in overall business, financial situation and exports and an increase in prices of raw materials when compared to the parameters in the first quarter of 2007-08.

The business expectations indices for January-March 2008 rose by 6 per cent and those for April-June 2008 went up by 3.9 per cent over the previous quarters. The indices, however, declined by 3.8 per cent and 3.4 per cent, respectively, over the corresponding quarters of the previous year.

The improvement in expectations for April-June 2008 over the previous quarter came from higher net responses for major parameters like working capital requirement, availability of finance, production, order books, capacity utilisation, employment, exports, imports, selling prices and profit margins as against the parameters in the previous quarter.

RBI said the ABN-Amro Purchasing Manager's Index (PMI) declined to 57.5 in March 2008 from 59.5 in the previous month. Though the index posted the lowest reading in the past eight months, it indicated a considerable improvement in operating conditions.

The seasonally adjusted output index remained markedly high as India Inc reported to continue expanding production at their plants in line with strong sales growth and efficiency gains during the month.

The input costs remained strong due to higher prices for a range of raw materials, including aluminium and oil, it added.