Manufacturing sector performs well in May: Survey

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India’s manufacturing sector expanded steadily in May, driven by rising output, a private business survey showed, although official data painted a different picture, says a Reuters report.

The HSBC manufacturing Purchasing Managers’ Index (PMI), compiled by Markit, eased marginally to 54.8 in May from 54.9 in April. It has now stayed above the 50 mark that separates growth from contraction for a little over three years.

The latest PMI survey’s output index rose to 56.4 in May from 56.1 in April, while the employment sub-index rose to its highest level in ten months.

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“Activity in the manufacturing sector kept up the pace in May with output, quantity of purchases and employment expanding at a faster pace. New orders decelerated slightly led by domestic orders,” said HSBC’s Eskesen.

Still, prices continued to soar and although the pace of price hikes dropped slightly from April, the survey showed the Reserve Bank of India still faces a tough task balancing lukewarm growth with relentless inflation.

The Reserve Bank of India (RBI) cut its key interest rate by a greater than expected 50 basis points in April to boost the flagging economy, but warned that it had little room to manoeuvre as inflation was likely to remain elevated.

“Inflation is still high by historical standards. In light of these numbers, the RBI does not have a strong case for further rate cuts, which if implemented could add to lingering inflation risks,” added Eskesen.

On the bright side, the PMI survey showed new export orders continued to grow at a strong pace in May, despite economic and political strife taking hold in Europe, one of India’s main trading partners.

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