India’s industry output, as measured by the HSBC Purchasing Manager’s Index (PMI) fell for the second consecutive month in April, as operating conditions improved at a weaker rate during the period. However, despite the marginal decline, the latest survey indicates considerable strengthening in the health of the industry.
The index stood at 57.2, marginally down from the reading of 57.8 in March. The fall in PMI reflects slower expansion in both output and new orders. However, both the indices tracking trends in these two variables remained at levels consistent with sharp rates of growth. Respondents said the demand for Indian manufactures was supported by better global economic conditions, successful promotional activities and good business reputations. Even as exports expanded during the month, domestic market was the primary driver of total new order growth.
“Input prices showed a slightly smaller rise in April than March, although it was still the second-highest increase since the PMI began five years ago. Meanwhile, output prices registered their strongest increase for three months as backlogs of work jumped to an all-time high. The latter further supports the argument that demand is growing more strongly than supply, giving companies the confidence to push through price rises. In our view, India is in for a protracted period of rate increases, the extent of which will surprise most forecasters,” said Robert Prior-Wandesforde, senior Asian economist, HSBC.
Outstanding business at Indian manufacturers’ end rose sharply in April, partly as a result of new order gains, but also due to power cuts and input delivery delays.
To ease capacity pressures and accommodate higher production requirements, manufacturers hired more staff and built up input stocks in April. Job creation was moderate and slightly weaker than the nineteen-month high recorded in February. Meanwhile, substantial rise in buying activity enabled firms to expand their raw material holdings at a marked and accelerated pace.
