Mumbai: India’s manufacturing activity expanded for a third straight month in June, albeit at a slightly slower pace, reflecting strong local demand, data showed on Wednesday.
The Markit Purchasing Managers’ Index (PMI) based on a survey of 500 Indian companies, fell slightly to 55.34 in June from May’s 55.7, which was the highest in eight months.
Still, it is above the threshold of 50 that separates expansion from contraction. It hit a trough of 44.4 in December and has steadily risen since then.
“China and India will be supporting the global recovery and the turnaround appears to be gaining momentum,” said Shubhada Rao, an economist at Yes Bank.
A raft of stimulus in the form of cuts in interest rates and factory gate duties have started reviving demand in India for houses and automobiles in recent months.
On Tuesday, the government eased overseas borrowing rules for firms to speed up work at tax-free special economic zones and other infrastructure projects to boost growth.
Prime Minister Manmohan Singh’s coalition, which was re-elected in May with a bigger mandate, is expected to provide another stimulus when it unveils its budget on Monday.
Government data showed on Wednesday exports fell an annual 29.2% in May to $11 billion, while imported slumped 39.2% to $16.2 billion.
However, Rao said exports were higher in absolute terms in May than in April, which indicated a turnaround.
“We are on the recovery mode,” she said.
The World Bank said in a recent report China and India would grow faster-than-expected this year although the prospects for the global economy remained unusually uncertain.
Manufacturing contributes 15% to India’s gross domestic product.
Industry secretary Ajay Shankar said on Tuesday factory output would expand at a faster pace in May than the annual 1.4% growth in April.
Car sales rose an annual 2.5% in May, climbing for the fourth month, and strong demand in rural and semi-urban areas pushed up motorcycle sales by 12.3% from a year earlier. Manufacturing output in April rose 0.7% from a year earlier, recovering from March’s 3.3% decline.
The central bank expects the economy to grow about 6% in fiscal year to the end of March, down from 6.7% in the previous year, but private-sector economists forecast a range between 5.8-7.2%.
The central bank and the government have taken aggressive steps since October to stimulate the economy. The key short-term lending rate, for instance, has been cut by 425 basis points in six moves to 4.75%.