"Indian manufacturing business conditions continued to improve in March, but persistent powercuts weighed on growth. Moreover, the volume of incoming new work increased moderately and at the slowest pace in 16 months. Export orders expanded slightly, with the rate of growth easing to the slowest in seven months," a HSBC Purchasing Managers' Index press release states.
The seasonally adjusted HSBC Purchasing Managers' Index (PMI) - a composite indicator designed to give a single-figure snapshot of operating conditions in the manufacturing economy - posted 52.0 in March, down from 54.2 in February), indicating an improvement in overall business conditions. However, the PMI was down to the lowest reading in 16 months.
March data signalled higher volumes of incoming new work in the Indian goods-producing sector. Growth in total new orders was, however, only moderate and the slowest in 16 months. Export orders rose slightly with the rate of expansion also easing. Output increased modestly, as persistent power shortages hampered production. The pace of growth was the slowest in 16 months.
Commenting on the India Manufacturing PMITM survey, Leif Eskesen, Chief Economist for India & ASEAN at HSBC said:
"Manufacturing activity lost momentum in March, with output growth slowing notably on the back of a deceleration in new orders and power outages. Inventories of finished goods were depleted to meet demand, partly due to the output disruptions caused by power cuts. This suggests that output could get a lift in coming months as inventories are replenished.
Encouragingly, input and output price inflation eased. Even so, the scope for further monetary policy easing remains limited."
Input prices increased during March, as has been the case in each month since April 2009. The rate of cost inflation was solid, but eased to the slowest in 32 months. Anecdotal evidence suggested that raw materials had increased in price, with some mentions of unfavourable exchange rates.