During the month of January, there was an influx of new business orders for local manufacturers. For New Delhi-based small sized manufacturing firms like Labco, order books are finally filling up after months of slowdown. Labco’s proprietor Vibhu Kapil says, “Since December last year, new business orders have been coming in. Though the expansion is still marginal among small players, it is no doubt a positive sign.”
The rate of expansion was found to expand for the second month running. The rise is in sync with faster new order growth, although backlogs of work continued to expand too, albeit, at a slower rate. Commenting on the India Manufacturing PMI survey, Leif Eskesen, chief economist for India and ASEAN at HSBC, said that activity in the manufacturing sector rebounded based on higher demand from both domestic and foreign clients, suggesting a recent recovery in sentiment.
Inflation, still a concern
However, inflation pressures were found to be firmly in place, as neither input nor output inflation prices abated. According to Mr Eskesen, the rebound in growth kept backlogs of work growing and employment growth positive. He concluded saying that these numbers are suggestive that it is still premature for RBI[i] to cut policy rates. The apex bank has to wait for evidence of a significant and sustained decline in inflation or further materialisation of downside risks to growth, before they can roll out rate cuts.
Priyanka Roy Chowdhury
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According to HSBC manufacturing purchasing managers' index (PMI), compiled by Markit for the month of January 2012, the Indian manufacturing sector projected the fastest growth in over 8 months. The domestic manufacturing industry made a marked leap from 54.2 in December 2011 to 57.5 in January 2012. India’s factory output notched a 62.9 figure in January this year from that of 55.8 recorded in the previous month. After a resounding lull on the manufacturing front, this news will boost the sagging morale of the domestic manufacturers.
