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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    S&P says ratings on India sovereign unaffected by Budget announcement

    Further developments in India's economic growth prospects, its external position, fiscal reforms including subsidies and GST, and political climate will determine the medium-term trajectory of the sovereign ratings on India, the ratings agency said

     
    Global ratings agency Standard & Poor’s (S&P) said India’s targeted deficit of 4.8% of its gross domestic product (GDP) is in line with the country's medium-term fiscal consolidation plan recommended by 13th Finance Commission and there would be no impact in its BBB- rating with negative outlook on India's sovereign credit.
     
    “The ratings on India continue to reflect the country’s favourable long-term growth prospects, moderately deep capital markets, and a high foreign exchange reserves. India's large fiscal deficits and debt, and its lower middle-income economy constrain the ratings. Further developments in India's economic growth prospects, its external position, fiscal reforms (including subsidies and GST), and political climate will determine the medium-term trajectory of the sovereign ratings on India,” S&P said.
     
    The government also revised its estimate for the deficit in the current fiscal year ending March 2013, at 5.2% of GDP, which is smaller than the 5.3% target earlier. The improvement in the current fiscal year’s deficit outcome has been achieved mainly through reducing expenditures. At the same time, there is little progress in structural reforms to reduce the vulnerability of the government's fiscal position.
     
    For example, India is still vulnerable to spikes in oil and other commodity prices. Although the government allowed a gradual increase in diesel prices earlier this year, the timing and the extent of such increases are uncertain. If the government enacts the Food Security Bill, the fiscal burden from food subsidy can increase. As a result, the total cost of subsidies may exceed the government's budgeted 2% of GDP in fiscal 2013-2014, compared with 2.6% in the current year, the ratings agency said.
     
    The budget contains measures aimed at encouraging infrastructure projects—such as tax-free bond issuance—but their effectiveness in attracting much-needed investment is uncertain at this stage. 
     
    “This is effectively the last budget for the United Progressive Alliance government before the next general election, which must be held by the second quarter of 2014. The government has presented a relatively prudent budget, in our view, despite the weak economic environment and the political temptation to increase fiscal expenditures ahead of a general election. However, there is a potential for the government to exceed its budgeted expenditures,” S&P said. 
     
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    COMMENTS

    Vinay Joshi

    7 years ago

    What S&P says is of zero value!

    Why S&P is hauled up in US courts?

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