India’s Sept factory output slows to lowest level this year

02/10/2014

New Delhi: Indian factory output touched a nine-month low in September on fewer export orders, even as inflationary pressures have eased, a key HSBC survey showed Wednesday.
The British banking giant said its Purchasing Managers` Index (PMI), which measures factory production, eased to 51.0 points from 52.4 the previous month.
The September reading was the weakest since December 2013 and is also the second consecutive month-on-month fall.
In the survey, keenly watched as a harbinger of industrial expansion and economic health, a reading of more than 50 points suggests expansion while anything below indicates contraction.
"Manufacturing activity continues to slow amid weaker output and new order flows. Responding to the slowdown, firms lowered purchases and trimmed inventories," said Frederic Neumann, HSBC Asian economic research co-head.
But on the brighter side, the report says the capital goods segment -- a key variable of underlying economic sentiment -- witnessed a sharp rise in the same period suggesting conditions in India`s manufacturing sector were slowly improving.
The central bank, firmly fixed on taming inflation, was unlikely to assist factories in boosting their activity by cutting interest rates, according to HSBC`s Neumann.
The Reserve Bank of India kept interest rates unchanged on Tuesday, citing the risk of rising food and fuel prices, despite business clamouring for a cut to lower lending levels and help boost economic growth.
Wholesale price inflation fell to a near five-year low in August, but retail inflation, which the RBI closely tracks, is hovering at close to eight percent.
The economy expanded by 5.7 percent in the first quarter of the financial year from the same period a year earlier -- the best quarterly performance in more than two years.
But economists say India -- with three quarters of a billion people under the age of 35 -- needs to return to at least eight-to-nine percent growth to create jobs for its young people.
"The RBI would rather see growth recover supported by supply side reforms than through monetary policy stimulus," Neumann said.
RBI Governor Raghuram Rajan took a similar line on Tuesday, saying the key to "turnaround in the growth path" was through reviving investment while keeping government spending on a tight leash and boosting exports.

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