The country’s manufacturing sector expanded at its fastest rate in over two years in May, bolstered by steady growth in output and new orders, reinforcing expectations of a further hike in interest rates late next month.
Automakers also posted sharp sales growth in May, although stocks dropped more than 2 per cent on fears that Europe’s debt problems would hurt fund inflows from foreign investors and potentially derail the global economic recovery.
Many economists and traders expect worries about the euro zone debt crisis will keep the Reserve Bank of India (RBI) from raising its policy rates before its next quarterly review on July 27, as some market watchers had earlier predicted.
In a sign economic growth is accelerating, the HSBC Markit Purchasing Managers’ Index (PMI), based on a survey of 500 firms, surged to a 27-month-high of 59.0 in May from 57.2 in April.
It was the 14th consecutive month that the indicator has been above the 50 mark that divides growth from contraction. The rate of growth had slowed in March and April.
The new orders index climbed to 63.7 in May from 61.9 in April, mainly driven by domestic demand, the PMI report showed. It was the 14th consecutive month when new orders expanded. The employment index rose to its highest since August 2005, signalling modest job creation across the economy.