India Manufacturing Expands Most In 2 Years

(RTTNews) - India's manufacturing sector expanded at the fastest pace in two years in December, underpinned by robust gains in output, new business and foreign orders, survey data from Markit Economics showed Friday.

The HSBC Purchasing Managers' Index rose to 54.5 in December from 53.3 in the previous month. Any reading above 50 indicates expansion in the sector.

Business conditions improved in all three market groups with the sharpest growth in consumer goods. Manufacturing output growth quickened to the highest level in two years supported by stronger order books.

New orders climbed for the fourteenth consecutive month in December and the rate of expansion marked the fastest since the end of 2012. New business from abroad also expanded at the quickest pace since April 2011.

Driven by strong output and new orders, manufacturers increased their input buying during the month. The rate of expansion accelerated to the most marked in the current 14-month sequence of growth.

Nonetheless, companies reduced their staffing levels contrasting with continued growth of production and incoming new work in December. That followed two consecutive months of slight job creation.

On the price front, input price inflation eased to the slowest in more than five-and-a-half years, despite rising pressure from cost of metals, chemicals and electronics. Consequently, weaker input prices lowered selling prices.

"With the disinflationary trend gaining ground, the RBI is expected to find space for some rate cuts in 2015," Pranjul Bhandari, chief India economist at HSBC said.

Consumer price inflation eased for the fourth consecutive month in November to the lowest since the government started releasing data in January 2012. Inflation came in at 4.38 percent in November, down from 5.52 percent in October.

At the December rate-setting meeting, Reserve Bank Governor Raghuram Rajan signaled a shift in policy stance is likely early this year.

The next policy review is scheduled for February 3 and Finance Minister Arun Jaitley is set to present the budget on the last working day of that month. Hence, economists expect any RBI move to come in March and beyond.

India's economy expanded 5.3 percent in the three months to September, slower than the 5.7 percent growth in the previous three months. Manufacturing logged only a marginal growth of 0.1 percent.

The Manila-based Asian Development Bank forecast India to grow 5.5 percent in the financial year 2014. The lender said the government should extend its effort to reach the 6.3 percent growth estimate in fiscal 2015.