Economy

Manufacturing sector growth improves on higher order flows

Our Bureau New Delhi | Updated on March 12, 2018 Published on June 02, 2014

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With the new Govt in place, economic momentum to gather pace: HSBC survey

Manufacturing sector growth inched up in May led by higher domestic and export order flows, according to an HSBC survey.

HSBC India’s Purchasing Managers Index (PMI), a measure of factory production, improved marginally in May at 51.4 points compared with 51.3 points in April. A score above 50 points shows growth.

Input prices — the cost of raw materials — rose at their slowest pace in over a year. Manufacturing output, which accounts for about 16 per cent of the overall economy, has been languishing for more than a year now.

Policy paralysis in the run-up to the elections led to a prolonged slowdown in output from mines, utilities and factories, and hurt growth in the sector.

Though technically the index is at a three-month high, the growth is just a tad higher than in April and March.

New export orders bounced back in May (53.7 points against 53 in April), which helped employment pick up slightly (50.6 versus 50.2 in April). In May, the quantity of purchases (51.8 against 53 in April) was weaker despite the improvement in order flows.

Crawling momentum

The manufacturing momentum may be stable, but it is stuck at a relatively depressed level. Incrementally, demand may be strengthening from both external and domestic sources. However, capacity constraints in the economy, including from energy shortages, are hampering growth.

With the new Government in place, economic momentum should pick up in the coming months as pent-up consumer and investment spending starts flowing again.

Still, risks linger, including potentially poor monsoon, the HSBC statement said.

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Published on June 02, 2014
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