India's manufacturing sector growth remained "steady" in April as a slowdown in export orders was countered by firmer domestic demand during the month, an HSBC survey said today.
The HSBC India Manufacturing Purchasing Managers' Index (PMI), a measure of factory production, stood at 51.3 in April, unchanged from 51.3 in March, amid moderate expansion of incoming new business orders.
Activity in the sector expanded for the sixth consecutive month in March. A PMI reading above 50 indicates growth while a lower reading means contraction.
"The momentum in the manufacturing sector held broadly steady, with domestic demand countering a slowdown in export orders," HSBC Chief Economist for India and ASEAN Leif Eskesen said.
Eskesen further said: "A build-up in finished goods inventories could weigh on output growth in coming months in the absence of a pick-up in demand."
During April, the momentum in manufacturing held broadly steady, but growth remains subdued.
"Output is held back by lack of power capacity and soft demand, with external demand easing recently and, anecdotally, due to a decline in orders for investment goods.
"While we may get more traction on economic reform and implementation of investment projects post elections, it will still take a while before we see a notable and more sustained lift to activity," HSBC said.
Though there were signs of easing inflation pressures in the manufacturing cluster, however, consumer price inflation remains elevated.
"Encouragingly, inflation pressures eased, but that does not mean that the RBI can take down its inflation guards," Eskesen said.
Moreover, the El Nino is expected to lead to below-normal precipitation, which could lift food inflation over the summer and into the fall. The RBI will, therefore, not have much to cheer about and will need to maintain a hawkish stance, HSBC added.
The RBI had increased the key policy repo rate three times since Raghuram Rajan took over as Governor in September.
HSBC manufacturing PMI unchanged in April
(Reuters) Indian factory growth showed no sign of acceleration last month as tepid demand restrained output even as price pressures eased, a business survey showed on Friday.
The HSBC Manufacturing Purchasing Managers' Index (PMI) , compiled by Markit and which gauges business activity in Indian factories but not its utilities, was at 51.3 in April, identical with the March level.
The new orders sub-index, which measures overall demand, slipped in April to 52.5 from 52.7 as demand from abroad waned. The export orders reading held above the 50-mark that separates growth from contraction but suffered its biggest one-month fall in nearly two years.
That pushed the output index down to its lowest level this year, although it remained comfortably above the 50 mark.
"The momentum in the manufacturing sector held broadly steady, with domestic demand countering a slowdown in export orders," said Leif Eskesen, chief economist for India & ASEAN at HSBC.
The survey also showed both input and output prices rose at their slowest pace in about a year. That is likely to provide some respite to policymakers after India's wholesale inflation hit a 3-month high in March.
The Reserve Bank of India left rates on hold at 8 percent last month.
The ruling Congress party's failure to revive the economy has turned the opposition Bharatiya Janata Party's pro-business leader Narendra Modi into the overwhelming favourite to head a new government after election results are announced in mid-May.