Factory output growth comes to near standstill in May
03 Jun 2013
India's manufacturing growth slowed almost to a halt in May as factory output shrank for the first time in over four years, an HSBC survey released today showed, suggesting that the economic downslide continues into the new fiscal year.
The HSBC Manufacturing Purchasing Managers' Index (PMI) findings followed data released on Friday that confirmed India's economy grew at its slowest pace in a decade in the fiscal year that ended in March.
The PMI, which gauges business activity in Indian factories but not its utilities, sank to 50.1 in May from 51.0 in April, and was the third straight monthly fall.
Though the May reading was the lowest since March 2009, the overall index has held above the watershed 50 level – which divides growth from contraction – for over four years.
The reading for the factory production sub-index, however, showed output contracted in May from a month earlier as new orders growth slowed to a trickle. The output sub-index fell to 48.6 in May from 50.2 in April.
Years of reckless spending, a long struggle containing inflation, high interest rates, policy paralysis and fragile global demand have put India back in a rut of slow growth, say HSBC economists.
The PMI survey shows factory activity in April and May slowed to the brink of contraction, which will hamper the feeble recovery seen in the January-March quarter.
Government data released on Friday showed the Indian economy grew 4.8 per cent in the January-March quarter from a year ago, bettering the 4.7 per cent growth recorded in the previous quarter, but ultimately resulting in decade-low growth of 5.0 per cent for the fiscal year to March 2013.
A bright spot in the PMI survey was that orders from abroad came in at a faster pace than in April, which might help the export-oriented sector avoid a downturn this month.
Companies also cut their prices, as last month saw the slowest rise in input costs in over four years.
