India manufacturing rises; off-cycle rate move unlikely
by Abhijit Neogy and Suvashree Dey Choudhury

Reuters    Translate This Article
2 February 2010

NEW DELHI/MUMBAI (Reuters) - India's manufacturing in January grew at its fastest pace in almost 18 months, driven by a sharp rise in new export orders that are supporting a recovery in the industrial sector, a survey showed on Monday.

The central bank, meanwhile, will only adjust monetary policy outside of its quarterly review cycle under extraordinary circumstances, a deputy governor said, meaning its next move is likely to occur only in April, even as inflation mounts.

The HSBC Markit Purchasing Managers' Index (PMI) , based on a survey of 500 companies, rose to 57.7 in January, its strongest reading since August 2008 and up from 55.6 in December.

'Any lingering concern that India's manufacturing recovery was tailing off should be well and truly put to rest by this strong release,' said Robert Prior-Wandesforde, senior Asian economist at HSBC in Singapore.

Exports continued to rebound, rising an annual 9.3 percent in December to $14.6 billion, their second consecutive monthly rise, although the pace of annual growth was slower than the 18.2 percent registered in November. The export figure, released on Monday, was initially revealed by the trade minister on Jan. 11.

Imports increased by 27.2 percent in December from a year earlier to $24.75 billion while the trade deficit shrunk by a little over 28 percent to $76.24 billion for the April- December 2009 period.

India's benchmark 10-year bond yield closed on Monday at 7.63 percent, rising after central bank Governor Duvvuri Subbarrao said yields would rise if government borrowing in the next fiscal year exceeds central bank expectations. Indian stocks ended flat.

OFF-CYCLE POLICY MOVE UNLIKELY

On Friday, the Reserve Bank of India (RBI) raised the cash reserve ratio for banks by a higher-than-expected 75 basis points in an effort to soak up excess liquidity, and ramped up its forecast for GDP growth in the current fiscal year through March to 7.5 percent from its earlier forecast of 6 percent.

Some analysts had predicted the central bank's next move would be a rate hike before its next review, scheduled for April 20, as inflation rises and economic recovery gains strength.

But on Monday, Deputy RBI Governor Subir Gokarn said that an off-cycle policy change would come only in reaction to unforeseen circumstances. The bank's next policy review is set for April 20.

'A mid-policy action is really in response to a completely unanticipated event,' he said during a conference call from the southern Indian city of Chennai.

'We will watch how inflation moves in the next few months. The way we are seeing inflation pressure pan out, we see inflation at 8.5 percent by March and that may start to moderate,' he said.

On Friday, the RBI lifted its forecast for wholesale price index (WPI) inflation at the end of the fiscal year in March to 8.5 percent from its earlier target of 6.5 percent, before it begins to moderate starting in July.

Some economists predict WPI inflation could hit double digits by the end of the current fiscal year.

EXPORT STRENGTH

The HSBC Purchasing Managers' Index mirrored India's positive export performance, with a more-than 5 point jump in the new export orders component, a sign that growth in manufacturing sector is increasingly fuelled by exports.

Month-on-month growth in December exports may have been slowed by the effect of pre-Christmas bookings wearing off, as well as a rupee that appreciated by 3.4 percent against the dollar in the October-December quarter.

Still-sluggish global demand could also weigh on continued expert momentum.

'Exports are not yet on a firm basis and it will be some time before it stabilises,' said D.H. Pai Panandikar, head of RPG Foundation, a private think tank.

While oil imports were up 42.8 percent after crude prices shot up from mid December, non-oil imports also climbed by 22.4 percent in December indicating robust economic activity picking up steam.

(Additional reporting by Swati Bhat, Anurag Joshi and Matthias Williams)

(Editing by Tony Munroe)

Copyright 2010 Reuters. Reprinted with permission from Reuters. Reuters content is the intellectual property of Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. Reuters and the Reuters Sphere Logo are registered trademarks of the Reuters group of companies around the world. For additional information about Reuters content and services, please visit Reuters website at www.reuters.com.  License # REU-5918-MES

Every day Global Good News documents the rise of a better quality of life dawning in the world from good news reported by the press; and highlights the need for introducing Natural Law based-Total Knowledge based-programmes to bring the support of Nature to every individual, raise the quality of life of every society, and create a lasting state of world peace.



Translation software is not perfect; however if you would like to try it, you can translate this page using:

(Google) Select a language English to Afrikaans English to Albanian English to Arabic English to Belarusian English to Bulgarian English to Catalan English to Chinese (Simplified) English to Chinese (Traditional) English to Croatian English to Czech English to Danish English to Dutch English to Estonian English to Filipino English to Finnish English to French English to Galician English to German English to Greek English to Hebrew English to Hindi English to Hungarian English to Icelandic English to Indonesian English to Irish English to Italian English to Japanese English to Korean English to Latvian English to Lithuanian English to Macedonian English to Malay English to Maltese English to Norwegian English to Persian English to Polish English to Portuguese English to Romanian English to Russian English to Serbian English to Slovak English to Slovenian English to Spanish English to Swahili English to Swedish English to Thai English to Turkish English to Ukrainian English to Vietnamese English to Welsh English to Yiddish

(Altavista babelfish) Select a languageEnglish to Chinese-simpEnglish to Chinese-tradEnglish to DutchEnglish to PortugueseEnglish to FrenchEnglish to GermanEnglish to GreekEnglish to ItalianEnglish to JapaneseEnglish to KoreanEnglish to RussianEnglish to Spanish

Send Good News to Global Good News.

Your comments.