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Exports decline, but local demand spurs manufacturing growth

Exports decline, but local demand spurs manufacturing growth
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First Published: Tue, Aug 04 2009. 12 37 AM IST

Bright spot: A Maruti Suzuki plant in Manesar, Haryana. Maruti Suzuki said sales rose 33% in July. Ramesh Pathania / Mint
Bright spot: A Maruti Suzuki plant in Manesar, Haryana. Maruti Suzuki said sales rose 33% in July. Ramesh Pathania / Mint
Updated: Tue, Aug 04 2009. 12 37 AM IST
Mumbai/New Delhi: Growth in India’s manufacturing activity held steady in July, while exports declined for a ninth consecutive month in June.
Manufacturing grew, helped by robust local demand, but intense competition curbed companies’ pricing power even as raw material costs jumped, a survey showed.
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The Markit Purchasing Managers’ Index (PMI), based on a survey of 500 companies, was at 55.30 in July, little changed from 55.34 in June.
It has been above the threshold of 50—which separates expansion from contraction—for four straight months.
Before that, it shrank for five months through end-March, hitting a trough of 44.37 in December.
“The domestic market remained the primary impetus to growth, although the export market also played a part as its recovery gained pace,” said Gemma Wallace, an economist at Markit Economics.
The new orders index rose to 59.75, its highest in nine months, from 58.56 in June.
Wallace also said there was evidence that capacity pressures have started building up.
Bright spot: A Maruti Suzuki plant in Manesar, Haryana. Maruti Suzuki said sales rose 33% in July. Ramesh Pathania / Mint
Strong signs of upturn in economic activity were visible in China, too, with a surge in domestic investment kindling factory activity and pushing a key gauge of the country’s manufacturing sector to a one-year high.
Sales figures published by Indian vehicle manufacturers also indicated that the growth momentum is being sustained.
Maruti Suzuki India Ltd, the country’s largest car maker, has said its sales soared 33% in July. Hero Honda Motors Ltd, India’s largest motorcycle maker, sold 30% more units than a year earlier in July.
Manufacturing output makes up about 15% of the country’s gross domestic product.
Separately, exports declined for a ninth consecutive month in June as the worst global recession since the Great Depression slashed demand for the country’s products.
Merchandise shipments dropped 27.7% from a year earlier to $12.8 billion (Rs61,312 crore), after sliding 29.2% in May, the government said on Monday.
Exports plunged 33.26% in March, the biggest fall on record, according to Bloomberg data going back to April 1995. July’s PMI data, however, indicated a slight rebound in exports.
The outlook for the trade sector in 2009 in India is not very encouraging, the finance ministry said on 2 July, citing an International Monetary Fund projection that world trade volumes will slide 11% this year.
India’s exports in the first three months of the fiscal year to 30 June declined 31.3% to $35.4 billion from a year ago, Monday’s report showed. Imports fell 29.3% in June to $18.97 billion, taking the trade deficit to $6.16 billion in the month, the government said.
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Kartik Goyal of Bloomberg contributed to this story.
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First Published: Tue, Aug 04 2009. 12 37 AM IST