Factory growth slips on weak local orders: HSBC survey
New Delhi: India’s manufacturing sector grew at a slower pace in April on weak domestic orders, an HSBC survey said today, raising hopes for a rate cut by the RBI.
The contraction in factory growth rate, after a robust uptick in the previous month, also resulted in some job losses and companies adopted a cost-cautious approach to hiring.
The headline HSBC India Purchasing Managers’ Index (PMI), compiled by Markit, stood at 51.3 in April, down from 52.1 in March, pointing to a weaker improvement in operating conditions across various industries.
The PMI is a composite gauge designed to give a single figure snapshot of manufacturing business conditions. A measure above 50 indicates that the sector is expanding, while a figure below that level means contraction.
The rate of growth in order flows moderated since March, amid softening domestic demand and competitive pressures, the survey showed.
“Despite recording softer rates of expansion, the Indian manufacturing sector held its ground in April, benefiting from ongoing improvements in operating conditions,” Markit Economist Pollyanna De Lima said.
The headline index was recorded above the crucial 50.0 threshold for the 18th successive month.
“However, we are yet to see growth leading to meaningful job creation, as the index measuring employment has shown little change to staff numbers since the beginning of 2014,” De Lima added.
April saw companies maintain a cost-cautious approach to hiring and vast majority of panelists signalled no change in employment levels.
Analysts said the slowing down of manufacturing sector growth would add to the clamour for rate cuts by the Reserve Bank of India (RBI). The central bank has lowered its policy rate twice so far in 2015, but maintained a status quo in its last monetary policy review on April 7 on fears of unseasonal rains impacting food prices.
The next review meeting is scheduled on June 2, although the previous two cuts have taken place outside the scheduled policy reviews. The HSBC’s manufacturing survey results for the current month would be released on June 1.
On the price front, tariffs fell for the first time since May 2013, as firms responded to a weaker cost inflation, HSBC said.
“Even with the slower pace of expansion, the goods-producing sector is on course to provide a boost to the overall economy in the upcoming quarter,” De Lima added.