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India Beat China in Manufacturing
By siliconindia
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Wednesday, 04 January 2012, 02:28 IST
Bangalore: A survey of purchasing managers undertaken by Reuters showed that India's manufacturing activity gushes to six- month high in December. The credit is to be given to the rise in factory output and new orders from domestic and international firms.
The HSBC Markit India Manufacturing Project Management Institute (PMI) jumped to 54.2 from 51.0 in November, recording it as its biggest monthly rise since April 2009.
Just as factory activity in developed economies across the world is contracting, Asia's third largest economy is expanding in manufacturing. According to a data released in China, the sector likely shrank in December, after remaining mostly below 50 since July.
Leif Eskesen, Economist at HSBC, said, "Activity in the manufacturing sector rebounded in December led by higher demand from both domestic and foreign clients, suggesting that the momentum in the sector is not quite as weak as official and more dated Industrial Production ( IP) data would suggest," as quoted by Firstpost.Business. According to an official data, industrial output plunged 5.1 percent in the year to October, the highest fall since March 2009, with raising fears of the economy heading for a hard landing.
The new orders index, jumped to 57.9 from 52.8 in November, signifying the factory sector might witness better days ahead. The orders from overseas clients grew at a fast rate last month, after a shrink of four months.
As the euro zone crisis hangs on Indian economy and polls by Reuters suggest that despite of high inflation, central bank will ease monetary policy by June to respond to it.
Central banks in China and Brazil have eased monetary policy to modify the impact of the euro zone's sovereign debt crisis, but the Reserve Bank of India has opted to break its series of hikes rather than ease.
India's headline inflation has stayed above 9 percent for 12 consecutive months despite 13 rate increases by the RBI since March 2010 that has lifted the benchmark lending rate to 8.5 percent from 4.75 percent.
Eskesen said, "The solid demand from clients allowed manufacturing companies to increase output prices at an accelerated pace to pass on rising costs. While the sequential inflation of input costs decelerated slightly, it remained high by historical standards."
According to the PMI data input prices were growing slowly as compared to last month while the output cost index for the second month showed a rise.
Employment grew for the second time in fourteen months according to the latest PMI survey.