Economy
India’s Manufacturing PMI up at 54.2 in February on domestic, international orders

The volume of incoming new work at manufacturing firms in India rose during February with around 29% of monitored companies reporting higher levels of new orders and just 14% noting a decline

The growth of India’s manufacturing sector increased in February supported by strong growth in domestic orders and a rise in international demand. The HSBC India Manufacturing Purchasing Managers’ Index (PMI)—a measure of factory production—stood at 54.2 in February. It declined to a three-month low level of 53.2 in January and was at 54.7 in December.

 

“Manufacturing activity picked up on an increase in domestic orders,” HSBC Chief Economist for India & ASEAN Leif Eskesen said.

 

The volume of incoming new work at manufacturing firms in India rose during February with around 29% of monitored companies reporting higher levels of new orders and just 14% noting a decline.

 

“Anecdotal evidence suggested that new orders increased in line with stronger demand, maintained product quality and the launch of new products,” the report said, adding that a further rise in export orders was recorded amid evidence of stronger demand from international clients.

 

 “Inflation pressures, however, remain firm, with input cost inflation holding steady and inflation of output prices picking up,” Eskesen said, adding that “The numbers underscore that the room for monetary policy easing is limited, even with progress on fiscal consolidation.”

 

The Wholesale Price Index-based inflation dropped to a three-year low of 6.62% in January. Retail inflation, however, continued to remain in double digits.

 

In its quarterly policy review on 29th January, the Reserve Bank of India (RBI) after a nine-month long hawkish monetary policy stance slashed its key interest rates by 0.25%.

 

Meanwhile, employment in the Indian manufacturing sector expanded slightly during February. Firms stated that payroll numbers were increased in tandem with higher production requirements.

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GDP growth declines to 4.5% in December quarter

The Economic Survey of 2012-13 tabled in Parliament on Wednesday has predicted a growth rate of 6.1%-6.7% for the next fiscal

 
India’s economic growth in the October-December period of the current financial year declined to 4.5% —the decade’s lowest quarterly growth. Growth in the reporting quarter was marred by the poor performance of farm, mining and manufacturing sector.
 
Concerned over the low growth, finance minister P Chidambaram Thursday said efforts are being made to achieve higher growth and hoped that GDP (gross domestic product) will grow by over 6% in the next financial year.
 
The GDP had grown by 6% in the October-December period of the previous fiscal.
 
The economic growth in the first nine months of the current fiscal (April-December) stood at 5.1%, lower than 6.6% in the year-ago period.
 
The economy had grown by 5.5% and 5.3% in the first quarter and the second quarter, respectively, of 2012-13.
 
“The first half is 5.4%. The second half must be below 5% if the prediction is 5% for the annual growth,” Chidambaram said.
 
The Economic Survey of 2012-13 tabled in Parliament on Wednesday has predicted a growth rate of 6.1%-6.7% for the next fiscal.
 
During October-December quarter of 2012-13, manufacturing sector grew marginally by 2.5%, against 0.7% growth in the same period of 2011-12, according to data released by the Central Statistical Organisation (CSO).
 
Farm sector output expanded by just 1.1% in the October-December period this fiscal against 4.1% in the same quarter last fiscal.
 
Mining and quarrying sector, however, showed some improvement and contracted by 1.4% during the quarter, as against a decline in output by 2.6% in the third quarter of 2011-12.
 
Trade, hotels, transport and communications segment also witnessed lower pace of growth at 5.1% in the quarter against 6.9% in the same quarter in year ago.
 
The growth rate of electricity, gas and water supply also dipped to 4.5% in the third quarter, from 7.7% witnessed in the same quarter of 2011-12.
 
Construction sector expanded by 5.8% in Q3 of 2012-13, as against 6.9% in the year-ago period.
 
Growth rate of services sector, including insurance and real estate, stood at 7.9% in the third quarter, against 11.4% in same quarter last fiscal.
 
According to the CSO data, during April-December period of this fiscal manufacturing sector grew by just 1.2% against 3.6% in the same period last fiscal.
 
In the first nine months of the current fiscal, mining and quarrying marginally recovered to a growth of 0.1% from a contraction in the output by 2.8%.
 
The farm and allied sectors growth declined to 1.7% in the nine month period under review cent compared to 4.3% a year ago.
 
Electricity, gas and water supply segment growth plunged to 4.7% in the first nine months of the current fiscal compared 7.6% in the same period in 2011-12.
 
Referring to fiscal deficit, the finance minister said that 4.8% target for 2013-14 is unlikely to be breached.
 
Commenting the GDP figures, FICCI said the numbers puts forth the persisting gloomy situation in the economy.
 
“Though some initial signs of optimism were indicated in the declining inflation numbers and a mild upturn was seen in exports, current GDP data has once again come as a mood dampener. It reaffirms the fact that we might just record a growth of 5 percent this financial year,” Ficci president Naina Lal Kidwai said in a statement.
 
Assocham president Rajkumar Dhoot said that the figures reflect that the downslide of the Indian economy is yet to see the bottom and hence recovery remains elusive.
 
“Given the nature of policy proposals contained in the Union Budget for 2013-14, it seems that revival is going to be a long drawn process unlike in the case of 2009,” he said.
 

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Govt to review gas pricing policy; remove uncertainties

Majority of the domestically produced natural gas is priced at $4.2 per mmBtu, one-third of the imported cost. Domestic and international firms have been saying that this cost is unremunerative for undertaking exploration in deeper and risky basins

Finance minister P Chidambaram on Thursday said the pricing policy will be reviewed and uncertainties removed. This comes in the wake of oil firms like BP Plc complaining of artificially low gas rates in the country which is holding back investments.

 

Majority of the domestically produced natural gas is priced at $4.2 per million metric British thermal unit (mmBtu), one-third of the imported cost. Domestic and international firms have been saying that this cost is unremunerative for undertaking exploration in deeper and risky basins.

 

Chidambaram, while presenting the Budget for 2013-14, said: “The natural gas pricing policy will be reviewed and uncertainties regarding pricing will be removed.”

 

A government appointed committee headed by C Rangarajan has suggested pricing domestically produced gas at an average of international hub prices and stripped down cost of imported liquid gas (LNG).

 

Currently, this average comes to about $8-$8.5 per mmBtu, half-way meeting expectations of companies of being allowed to charge a price equivalent to imported liquefied natural gas (LNG).

 

Oil minister M Veerappa Moily has already accepted the recommendations and is moving Cabinet for a formal approval.

 

Chidambaram also said the oil and gas exploration policy will be reviewed to move from profit sharing to revenue sharing contracts.

 

The cost-recovery model of the New Exploration Licensing Policy (NELP), which allows operators to recover all their investment in successful as well as unsuccessful wells from sale of oil and gas before sharing profits with the government, had come in for strong criticism from the Comptroller and Auditor General of India (CAG).

 

The CAG felt the cost recovery model incentivises firms to keep raising investment to postpone government’s profits.

 

To put an end to the controversy, the Rangarajan Committee has suggested moving to a revenue sharing model where companies will have to bid upfront stating the part of the production they will share with the government from the very first day.

 

The finance minister also said NELP blocks that were awarded but are stalled for defence and other clearances will be cleared soon.

 

Chidambaram also said a policy to encourage exploration and production of shale gas will be announced.

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