Business Standard

Manufacturing growth at 20-mth low

BS Reporter  |  New Delhi 

India’s manufacturing growth fell to a 20-month low in July, due to more expensive inputs, according to the widely tracked HSBC’s Purchasing Managers’ Index (PMI).

The index was down to 53.6 points in July from 55.3 in June. In June, the index was at a nine-month low. If the PMI is above 50 points, it denotes growth; if it is below 50 points, it means negative growth and at 50 points, it implies flat growth.

According to a statement by financial information firm Markit Economics, which compiles the index, input prices rose substantially in July due to high raw material costs. The rate of input price inflation was also high, compared to June.

Manufacturers seemed to be absorbing this rise in cost, since the growth in pricing was much lower. The increase in both input and output prices remained elevated, compared to their respective long-run series averages.

New export orders contracted for the first time since May 2009, due to easing of demand from its major export destinations. The output expanded but the rate of increase slowed for the third successive month, the statement added.

The growth in purchasing activity also slowed on the back of weaker expansion in output.

Leif Eskesen, chief economist for India & Asean at HSBC, said the result confirmed that inflation pressure remained firmly in place, despite the ongoing moderation in growth. “The RBI will, therefore, have to maintain its tightening bias for a while still, to anchor inflation expectations,” he said.

However, analysts said RBI’s move to steeply raise policy rates may also stifle the growth rate further.

Already, core sector data for July showed that output for three of eight sectors — natural gas, fertiliser and coal — contracted.

First Published: Tue, August 02 2011. 00:08 IST