Bangalore: India’s manufacturing sector expanded at its fastest pace in six months in November on the back of robust new business and a sharp rise in export orders, a survey showed on Wednesday.
The HSBC Markit Purchasing Managers’ Index, based on a survey of 500 companies, rose to 58.4 from 57.2 in October. It was the strongest level since May, when it was 59.
The November reading marked the 20th consecutive month that the key index of manufacturing in Asia’s third-largest economy has been above the reading of 50, which divides growth from contraction.
“The momentum in manufacturing picked up further in November. Output accelerated and growing order books point to a continued strong momentum in the months ahead,” said Leif Eskesen, chief economist for India & Asean at HSBC.
Official data released on Tuesday showed India’s economy grew by a blistering and faster-than-expected 8.9% in the September quarter from a year earlier, boosted by farm output and manufacturing.
That is likely to add pressure on the central bank to continue raising interest rates, though traders do not see another hike until early next year.
Inflation, though easing slightly, was still way above policymakers’ comfort levels at 8.58% in October and the latest growth figures might cause the Reserve Bank of India (RBI) to rethink the pause in its policy tightening cycle.
In the November PMI survey all but two sub-indexes showed expansion, indicating further strength which will push prices higher.
The survey also showed that manufacturers saw a big jump in overseas orders and attributed this to an improvement in global economic conditions.
The input price index surged to a six-month high of 62.5 from October’s 60.9, mainly due to increasing raw material costs, which will continue to drive up output prices as manufacturers pass the higher costs to consumers.
The substantial increase in new business, coupled with new order volumes seeing their strongest expansion in four months, caused the backlog of work to hit a near-series high, according to the survey.
“A spike in backlogs of works suggest tight capacity, which together with rising input and output prices underscores the need for continued monetary policy tightening by the RBI,” Eskesen said.
However, easing inflation and slower industrial output growth — a key indicator of growth momentum — might support the central bank’s plans to wait until next year to hike interest rates.
Industrial output slowed unexpectedly in September to 4.4% from a year earlier, down from the previous month’s upwardly revised 6.92% growth.
Despite the sustained growth seen in the manufacturing sector the employment index fell below the no-change mark of 50, signalling a marginal reduction in job numbers as manufacturers indicated that employees were leaving for higher wages elsewhere.