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India’s manufacturing sector ended 2013 on a pessimistic note as growth fell in December against the previous month, according to the widely-tracked HSBC Purchasing Managers’ Index (PMI). However, the consumer segment, which had faced the heat of slowdown, showed some signs of an uptick.
The PMI was down at 50.7 points in December 2013 from 51.3 in the previous month. This is the second month in a row that manufacturing activities have shown a growth after falling since August. A reading above 50 points shows growth, while the one below 50 shows contraction.
Leif Eskesen, chief economist for India and Asean at HSBC, said: “Manufacturing activity decelerated slightly in December as a slowdown in domestic order flows led to slower output growth. Today's (Thursday) numbers show that growth remains moderate and struggles to take off due to lingering structural constraints.”
One such structural problem was power outages. Markit Economics, a financial information firm which compiles the data, said in a statement backlogs of work rose again during the latest survey period, with the rate of accumulation climbing to a six-month high. “Anecdotal evidence highlighted raw material shortages at vendors and power cuts,” it said.
However, the consumer goods segment held up. “New orders placed at Indian manufacturers rose in December, albeit marginally. Panelists linked higher levels of new work to improved domestic and overseas demand. However, the latest increase was mainly focused in the consumer goods category,” the statement added.
The survey did not make a distinction between consumer durables and consumer non-durables. In the official Index of Industrial Production (IIP) data, it was largely consumer durable goods that bore the brunt of a slowdown. People have not entirely postponed purchases of consumer non-durables.
According to IIP data, consumer durable goods production fell 11.2 per cent in the first seven months of the current financial year, while that of consumer non-durable items rose 6.7 per cent.
India’s economic growth remained below five per cent for the fourth consecutive quarter in July-September. Economic growth stood at just 4.6 per cent in the first half of the current financial year.
However, policy makers expect the growth to accelerate in the second half.
If PMI is any indication, the growth, at least on the manufacturing front, is showing only a gradual uptick.
PMI average for the manufacturing sector stood at 50.5 points in the October-December quarter, slightly higher than 49.4 in the previous quarter ended September 2013.
The survey showed that inflationary pressures were still there in the economy, although they declined marginally. At a time when the Reserve Bank of India refrained from tightening monetary stance in its policy review last month due to uncertain outlook on inflation, Eskesen expected the central bank to harden its stand to bring down prices.
“Inflation pressures remain firm and are proving sticky. RBI may yet again have to flex its muscles and tighten monetary policy to bring down the elevated level of inflation,” he said.
