Mumbai: India’s manufacturing grew at the slowest pace in nine months after the Reserve Bank of India (RBI) raised interest rates by the most in a decade to tame prices.
The Purchasing Managers’ Index fell to 55.3 in June from 57.5 in May, HSBC Holdings Plc and Markit Economics said in an emailed statement on Friday. A number above 50 indicates an expansion.
Factory output has weakened in India and China, the fastest growing major economies, as policymakers tightened borrowing costs to curb price gains. India’s inflation may quicken after the government increased diesel prices last week, Goldman Sachs Group Inc. and Kotak Securities Ltd said.
“India is not going to see any respite from inflationary pressures after the fuel price hike,” said Suvodeep Rakshit, an economist at Kotak Securities in Mumbai. “RBI will continue tightening despite signs of growth moderating.”
Rakshit expects the central bank to lift borrowing costs for the 11th time since the start of 2010 in the next monetary policy meeting on 26 July.
The Bombay Stock Exchange’s benchmark Sensex fell 0.44% to 18,762.8 points on Friday. India’s key Wholesale Price Inflation accelerated to 9.06% in May from an 8.66% gain in April, according to the commerce ministry.
The government’s 24 June decision to raise diesel prices for the first time in a year will spur living costs, Goldman said on Wednesday as it raised India’s inflation forecast to 8.6% for the year ending 31 March from an earlier estimate of 8.1%.