3.3.15

Choppy Statz


India's manufacturing sector is yet to see sustainable recovery, with two sets of data pointing towards a dismal show even as the government makes efforts to boost domestic production. Core sector output growth in January slumped to the lowest in over a year at 1.8%, compared with 2.4% in December.
The HSBC Purchasing Managers Index showed activity in India's manufacturing sector slowed to a five-month low in February. The reading for the past month eased to 51.2 from 52.9 in the previous month as the pace of output and new orders declined. A reading over 50 shows expansion in activity, while one below it indicates contraction.
The core index captures output in eight infrastructure industries: coal, electricity, crude oil, natural gas, steel, cement, fertilisers and refinery products. It has a 38% weight in the Index of Industrial Production (IIP), making it a good lead indicator of industrial activity. Output shrank in two sectors ­ crude oil and natural gas.
The readings show the government's efforts to boost manufacturing since it took over in May last year have yet to show market results. It has I laid emphasis on reviving manufacturing in the Union Budget presented on Saturday , too, s through correction in duty anomaly and improving credit access for small and medium enterprises. These steps, and expected rate cuts from the central bank as inflation remains benign, could help the sector in the coming months. But for now, manufacturing mostly remains weak.
The manufacturing sector is estimated to post 6.8% growth in 2014-15, compared with 5.3% in the previous fiscal year. The eight core sectors ex panded 4.1% during the first 10 months through January , just a shade more than the year-earlier period's 4% growth, indicating that the manufacturing sector may still not have got out of the woods and raising doubts over meeting the estimates. In January , the fertiliser sector was the top performer, posting 7.1% growth, followed by refinery products at 4.7%. Output in coal grew by a dismal 1.7%.
According to the HSBC PMI data, a positive indicator was foreign orders, which “rose at a strong and accelerated pace“, Markit's De Lima said. This and the fact that the PMI remained in the positive territory have brightened the prospects for a rebound in output and employment in coming months, De Lima said.

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