Factory output hits two year high

New Delhi: Indian manufacturing activity grew fastest in two years in December as new orders flooded in and factories kept price increases to a minimum, according to HSBC Manufacturing PMI. This comes on top of infra growing fastest in five months at  6.7 percent in November due to higher production of coal, cement and refinery products.
“Indian goods producers ended 2014 in a higher gear, with business conditions improving at the quickest pace in two years in December,” said HSBC.

Accelerated growth of the manufacturing sector was reflected by fas-ter expansions in output, new business and foreign orders. Consumer goods was the best performing of the broad sectors monitored. It said that new work from abroad expa-nded at the quickest pa-ce since April 2011. “The steep rise in new orders from the consu-mer sector more than offset the decline in new orders from investment goods. In our view, a rise in the latter is critical for a meaningful pick-up in economic growth,” said HSBC.

The headline HSBC India Purchasing Managers’ Index (PMI) stood at 54.5 in December, up from 53.3 in the prior month. Any number above 50 means expansion and below 50 mean contraction. Latest data also painted a brighter picture in terms of prices, as inflationary pressures eased during the month, said HSBC. “With the disinflationary trend gaining gro-und, the RBI is expected to find space for some rate cuts in 2015,” said Pranjul Bhandari, chief India economist at HSBC. Finance minister Arun Jaitley has maintained that GDP will grow faster in the new fiscal.

On the inflation front, the rise in input prices eased to its lowest value in five and a half years. This was also reflected in weaker growth in output prices, said HSBC. It said that in order to raise investments, there is need to free up resources on the ground by addressing issues around land acquisition, availability of raw material and government clearances, which seem to have stalled several investment projects.