According to the HSBC India Services Purchasing Managers Index (PMI), the domestic manufacturing industry showed factory output rising at a steady rate in the latest survey period during the month of May 2012, touching a 3-month high of 54.7. The HSBC Composite Output Index, which governs the manufacturing and services industries, posted 55.3 in May, which is a rise from 53.8 of the previous month.
Inflation and economic upheaval have been weighing down on the domestic manufacturing sector for the past few months with the result being fluctuations in the index figures. New business growth was witnessed significantly within the sector, even though it was slow paced than was expected. The other factor that drove growth in the manufacturing sector was new orders that were placed with manufacturing firms.
In a press statement, Leif Eskesen, chief economist for India and ASEAN at HSBC said that following to the weak first quarter GDP figures, the index for May is quite encouraging. According to Mr Eskesen, not only new orders poured in rapidly, activities related to employment have also picked up pace.
According to Sudhanshu Chakraborty, proprietor of Sandeep Enterprise, a Kolkata based railway part equipment manufacturing unit, “Yes, new orders have come in but not enough to be very upbeat about the healthy growth of the sector. However, these figures are certainly reassuring.”
Inflation still a concern
However, there was caution in Mr Eskesen’s statement when he said that inflation figures for input and output prices had risen again and it is relatively high by standards. Even though the backward-looking GDP numbers are indicative of rising growth risks and pressures on RBI to introduce rate cuts, the index figures portray that there is no requirement for an aggressive monetary policy easing in the very near future.
In an economy struggling amidst rising inflation, the May PMI which records a 3-month high figure certainly instils a ray of hoe for the manufacturing sector.
Priyanka Roy Chowdhury