India's manufacturing sector expanded at the slowest pace in seventeen months in April on the back of a deceleration in domestic orders and power outages, a survey by Markit Economics showed Thursday.
The seasonally adjusted HSBC Purchasing Managers' Index for the manufacturing sector dropped to 51 in April from 52 in March, hitting the lowest level since November 2011. An index reading above 50 indicates expansion in the sector, while one below suggests contraction.
Due to persistent power shortage, production at Indian factories increased at the slowest pace in forty-nine months in April, after recording strong growth in the first quarter of the year, the survey showed.
New orders received by manufacturers increased for the forty-ninth successive month in April, helped by firm demand from the private sector new product launches. But the rate of growth was the slowest since September 2011.
Companies purchased higher quantity of raw materials and semi-finished goods in April. Although input buying increased markedly, the rate of purchase eased from March. Around 8 percent of the monitored companies reported a higher stock of finished goods.
Manufacturers increased their workforces further during the month, extending the current period of job creation to 14 months. The surveyed firms linked the rise in employment levels to higher production requirements, but hiring was stymied by labor shortages.
Average input prices rose solidly, but at the slowest rate since June 2010. Factory gate prices increased modestly during the month as competitive pressures prevented firms from passing the full cost burden on to clients.
Inflation, based on the wholesale price index, eased to 5.96 percent in March, its lowest level in more than three years.
The Reserve Bank of India is widely expected to cut interest rates when policymakers meet on Friday, seeking to revive the economy after growth hit a decade-low in the fiscal year 2012-13. The repo rate is expected to be lowered to 7.25 percent from 7.50 percent and the reverse repo rate to 6.25 percent from 6.50 percent.
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