Mumbai: According to a survey, India’s manufacturing output expanded at its slowest pace in 14 months in September as domestic demand cooled in the face of seven-year high interest rates.
The drop in the ABN Amro Bank purchasing managers’ index also showed that a slow down in global demand was starting to bite into exports even though the rupee has dropped 16% this year against the dollar.
The PMI, based on a survey of 500 companies, fell to a seasonally adjusted 57.3 in September from 57.9 in August. The reading was the lowest since July 2007.
A reading above 50 signals expansion while a figure below 50 suggests contraction.
ABN Amro Bank senior economist Gaurav Kapur said that the fall suggested manufacturing activity had lost momentum in September.
“That was mainly due to a decline in growth of new orders, implying some deterioration in demand, both from local as well as export markets,” Kapur said.
The central bank raised its reporate, its main short-term lending rate, by 125 basis points in three moves in June and July, taking it to a seven-year high of 9%.
It has also sharply raised banks’ cash reserve requirement this year.
The PMI, compiled by UK-based Markit Group Ltd and sponsored by the Dutch bank, tracks changes in manufacturing business conditions by polling purchasing managers each month on output, new orders, employment and prices.
The survey’s output index fell to 61.7 in September from 62 in August. The new orders index dropped to 62.6, its lowest reading since February 2008, from 64.8 in August.
The export orders index fell to a five-month low of 53.0 in September from 55.2 in August.
The pace of output price increases slowed modestly, with the index falling to 54.6 in September from 54.8 in August.
The index of input prices rose to 57.8 in September from 56.1 in August, which manufacturers blamed on expensive raw materials and fuel.
Indian wholesale inflation held steady above 12% in mid-September, significantly above the central bank’s target for the end of the fiscal year next March of getting inflation down to around 7%.