Manufacturing slows to its lowest in 4 yrs
Fall in domestic demand hits factory output, all eyes on Reserve Bank. HT reports.Updated: Jun 03, 2013, 21:04 IST
Here’s more proof that all is not well with the Indian economy.
India’s manufacturing activity slowed down to its weakest pace in 50 months in May, raising concerns that it may take longer-than-expected to scale the slowdown hump in Asia’s third-largest economy that reported a decade-low growth of 5% in 2012-13.
The overall purchasing managers’ index (PMI) from HSBC, a metric to measure industrial activity capturing output to sales, fell to 50.1 in May from 51.0 in the previous month on the back of cooling domestic demand.
A reading below 50 suggests a contraction from the previous month, while a reading above that level points to expansion.
The HSBC India Manufac­turing PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 500 companies based on industry contribution to India’s gross domestic product (GDP).
These provide an advance indication of what is really happening in the private sector economy by tracking variables such as output, new orders, suppliers’ delivery time and prices across manufacturing, construction, retail and service sectors.
“With growth moderate and inflation easing, the Reserve Bank of India may fire another salvo” at its June 17 meeting and cut its leading lending rate for a fourth time since the start of the year, said HSBC economist Leif Eskesen.
India’s economic growth slumped to a 10-year low of 5% in 2012-13 proving fears of a widespread slowdown as factories produce less, exports shrink, companies offer fewer jobs and prices remain high.
The crippling deceleration will also mount pressure on finance minister P Chidambaram to announce growth-reviving measures.
A patchy monsoon last year appears to have crimped food output with agricultural sector growing at slower 1.9% in 2012-13 against 3.6% in the previous year.
RBI sensitive to growth: Subbarao
Reserve BANK of India (RBI) governor D Subbarao on Monday said the central bank is sensitive to growth concerns but not at the cost of higher inflation. “There is a threshold level of inflation. If inflation is above that level, it is inimical to growth. If inflation is below that level it is possible that you can bargain for higher growth, tolerating a little higher inflation.”PTI/New Delhi