Indian Manufacturing Growth at Fastest Pace in Five Months

Purchasing activity grew substantially during April.

In April, the HSBC Purchasing Managers' Index (PMI) climbed to 58 in April from 57.9 the previous month, demonstrating the fastest pace of growth in the last five months. The PMI index is keenly watched as a signal of industrial growth.

Output growth was driven by a growth in new orders, the PMI survey showed. Purchasing activity grew substantially during April, rising at the quickest clip since January 2008.

"The strong manufacturing PMI numbers are testament to the resilience of growth" in Asia's third-largest economy, said HSBC chief India economist Leif Eskesen.

India's economy is forecast to grow 9% this fiscal year and the central bank has warned of capacity constraints that are fuelling inflation as factories work at full tilt and supply struggles to keep up with demand.

"The numbers confirm that inflation and not growth is the concern, and that the Reserve Bank can continue its tightening cycle uninterrupted and with more aggressive steps," said Eskesen. The central bank has been raising rates in gradual, quarter-point steps to minimize the impact on economic growth. But inflation has remained elevated and some economists expect the central bankers to move more boldly when they meet on May 3.

"There is a good chance that the Reserve Bank will step it up and hike rates by 50 basis points," said Eskesen. The benchmark repurchase, or repo rate, at which the bank lends to commercial banks, is currently 6.75% while the reverse repo, paid to banks for deposits, is 5.75%.

Output growth was driven by a growth in new orders, the PMI survey showed. Purchasing activity grew substantially during April, rising at the quickest clip since January 2008.

Copyright Agence France-Presse, 2011

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