Fuelling recovery hopes in Asia’s third-largest economy, business activity in Indian manufacturing sector expanded in the month of November on the back of solid inflow of new orders which have driven the manufacturing firms to scaled up production. The HSBC Manufacturing Purchasing Managers’ Index (PMI), a headline index designed to measure the overall health of the manufacturing sector, jumped to 21-month high at 53.3 in the month of November from 51.6 in the previous month’ October. The latest reading signaled a solid improvement in business conditions and remained above the crucial 50 mark for the thirteen consecutive months that separates growth from contraction. However, a cautionary note was provided as the survey indicated that inflationary pressures intensified in November suggesting that RBI should remain vigilant about lowering interest rates.
The Survey further highlighted stronger-than expected demand, as new order growth accelerated to the quickest in 21 months. New export orders also continued to grow in November, although the pace slightly faltered from October. Among the monitored sub-sectors, consumer goods remained best performing sector. Manufacturers reported that stronger order books and higher production requirements fuelled further expansions in purchasing activity and pre-production inventories in October. Subsequently, stocks of inputs expanded for the sixth month running, and post-production inventories also rose during the month albeit marginally. Despite accelerated expansions in output and new business, employment in the Indian manufacturing, economy remained broadly unchanged in November.
On inflation front, the HSBC survey indicated high inflationary pressure as manufactures paid higher prices for metals, chemicals and energy. Among the surveyed sub-sectors, the sharpest increase in purchases' prices was witnessed in intermediate goods and accordingly, manufacturers also increased their output prices. The rate of charge inflation picked up to the quickest in five months, suggesting that inflation may increase in coming months.