India’s factory output hits 17-month peak

Published August 2, 2014
Business confidence has been building that Premier Narendra Modi’s right-wing government will initiate policy changes to spur growth. — File photo
Business confidence has been building that Premier Narendra Modi’s right-wing government will initiate policy changes to spur growth. — File photo

NEW DELHI: Indian factory output surged to a 17-month peak in July, according to a key business survey on Friday, fuelling recovery hopes in Asia’s third-largest economy.

But the HSBC Purchasing Managers’ Index (PMI) keenly watched as a harbinger of industrial expansion and overall economic health, also flagged inflation worries ahead of a key monetary policy meeting next week.

The PMI survey jumped a full 1.5 points to 53.0 last month — its best performance since February 2013. A reading of over 50 points suggests expansion while under 50 indicates contraction.

“A flood of new orders from both domestic and external sources has led to a surge in activity,” Frederic Neumann, HSBC Asian research co-head said.

“Finally, the manufacturing sector is starting to pick up steam,” Neumann said.

The output and order rise was across the board, Neumann noted, boosting hopes the economy could be rallying from its deepest slowdown in a quarter-century.

Business confidence has been building that Premier Narendra Modi’s right-wing government, which took office in late May, will initiate policy changes to spur growth, despite a budget last month that eschewed radical reforms.

The PMI results coincided with a government survey in neighbouring China showing manufacturing activity rose in July at its fastest pace in over two years.

However, the Indian PMI survey also stoked inflation worries ahead of a central bank monetary policy-setting meeting next Tuesday.

Input prices accelerated at their fastest pace since February, the survey found, suggesting inflation could stay high as firms seek to recover mounting costs.

Published in Dawn, August 2nd , 2014

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