The growth of India's manufacturing sector steadied in march with sustained new orders and output. Input costs are at their 6 year high indicating rising inflationary pressure, an HSBC survey pointed out.
HSBC's Purchasing Managers Index (PMI), based on 500 companies, remained steady at 57.9 in March from February. This the highest level attained since last November. A PMI figure above 50 indicates growth and a figure below 50 indicates contraction. The PMI has been above 50 levels since last two years.
The index for new orders rose to 64.2 last month from 62.4, its fastest growth since August 2008, reflecting strong demand and favourable economic prospects for the $1.3 trillion economy. India's finance ministry expects the economy to grow 8.6 percent in the fiscal year that ended on March 31 and 9 percent in the current year.
The input price index rose to its highest level last month since the survey began in April 2005, propelled by further rises in raw material costs and crude oil prices which have surged 17.6 percent since the beginning of February
The ongoing crises in Libya has ensured that crude prices stay above the $100 mark. The Japanese quake and nuclear problems also added to the rising crude prices
India's wholesale price index rose an annual 8.31 percent in February on higher fuel and manufactured product prices. Supply bottlenecks and further rises in crude oil could push domestic prices higher, beyond the 7 percent expected by the finance minister for end-March. Output prices in March rose at a much faster than the previous month, the survey showed, indicating that the producers have passed on the rising input costs. Backlogs of work also rose sharply, driven by growth in new orders and capacity constraints.
The central bank will review rates on May 3. Further hikes in interest rates over the coming year could hamper growth prospects as firms struggle to cope with the rising cost of capital while boosting productive capacity
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