India\'s manufacturing economy is picking up: HSBC Survey

According to recent HSBC Survey data, India’s manufacturing economy signalled sustained growth, with output and new orders rising simultaneously for the fifteenth consecutive month.

On the price front, lower prices paid for metals, chemicals, plastics and energy led to the weakest rise in input costs in the current 70-month period of inflation. Despite falling from December’s two-year record of 54.5 to 52.9, the headline HSBC India Purchasing Managers’ IndexTM (PMITM) – an indicator designed to give an accurate overview of manufacturing operating conditions – remained consistent with a solid improvement in business conditions in January.

“Production rose at a robust pace, extending the current sequence of expansion to 15 months. Survey responses generally attributed higher output to stronger order books,” revealed the data.

The survey also said that higher new work intakes and subsequent production requirements also led to a further rise in purchasing activity at the start of 2015. Among the monitored subcategories, input buying rose quickest in consumer goods. Similarly, input stocks and post-production inventories at Indian goods producers increased in January.

Input costs faced by Indian manufacturers continued to increase in January, extending the current period of inflation which began in April 2009. The rate of inflation slowed to the weakest in that sequence, helped by lower prices paid for metals, chemicals, plastics and energy. As a result, output charges rose only fractionally during the month.

Commenting on the India Manufacturing PMI survey, Pranjul Bhandari, Chief India Economist at HSBC said, "Manufacturing activity continued to signal improvement in January, though the rate of growth slipped to a three month low. The slip can partly be attributed to consolidation after two months of impressive upticks.”

“New orders, both from domestic and international sources, also continued to grow, though at a slower pace than in December. New orders were strongest in the consumer goods sector. On the inflation front, growth in input and output prices moderated further due to cheaper commodity prices. Sluggish growth and falling inflation further reinforces our view that the RBI should deliver upfront rate cuts. We expect the repo rate to be lowered by 75bp in the first half of 2015,” added Bhandari.