New Delhi: India’s manufacturing in January grew at its fastest pace in almost one-and-a-half years, driven by a sharp rise in new export orders that are supporting a recovery in the industrial sector, a survey showed on Monday.
The HSBC Markit Purchasing Managers’ Index, based on a survey of 500 companies, rose to 57.7 in January, its strongest reading since August 2008 and up from 55.6 in December.
“Any lingering concern that India’s manufacturing recovery was tailing off should be well and truly put to rest by this strong release,” said Robert Prior-Wandesforde, senior Asian economist at HSBC Holdings Plc in Singapore.
Illustration by Shyamal Banerjee; Graphic by Ahmed Raza Khan / Mint
Exports continued to rebound, rising an annual 9.3% in December to $14.6 billion (around Rs67,600 crore today), their second consecutive monthly rise, although the pace of annual growth was slower than the 18.2% registered in November. The export figure, released on Monday, was initially disclosed by the commerce and industry minister on 11 January.
Imports increased by 27.2% in December from a year earlier to $24.75 billion, while the trade deficit shrunk by a little over 28% to $76.24 billion in the nine months between April and December 2009.
Markets were little moved by Monday’s data, with the Bombay Stock Exchange’s benchmark index down marginally 0.01%, given that the figures merely confirmed the increasing momentum of India’s recovery from the global downturn.
On Friday, the central bank raised the cash reserve ratio for banks by a higher-than-ex pected 75 basis points in an effort to soak up excess liquidity, and ramped up its forecast for GDP growth in the current fiscal year through March to 7.5%, from its earlier forecast of 6%.
The HSBC Purchasing Managers’ Index mirrored the positive export performance, with a more than five points jump in the new export orders component, a sign that growth in the manufacturing sector is increasingly fuelled by exports.
Month-on-month growth in December exports may have been slowed by the effect of pre-Christmas bookings wearing off, as well as a rupee that rose by 3.4% against the dollar in the December quarter.
The still-sluggish global demand could also weigh on continued expert momentum.
“Exports are not yet on a firm basis and it will be some time before it stabilizes,” said D.H. Pai Panandiker, head of the RPG Foundation, a private think tank. While oil imports were up 42.8% after crude prices shot up from mid-December, non-oil imports climbed by 22.4% in December indicating robust economic activity picking up steam.
Anurag Joshi and Matthias Williams contributed to this story.