India manufacturing PMI steady at 52.8 in September

NEW DELHI: India's manufacturing sector growth in September held on to this year's slowest pace seen in the previous month, raising hopes that the economy may have bottomed out even as analysts cautioned against increasing inventories.

The seasonally adjusted HSBC Purchasing Managers' Index released on Monday posted a reading of 52.8 , the same as in August, amid indications of better external and domestic demand.

A reading of 50 separates growth from contraction in the private questionnaire-based survey to 500 companies compiled by Markit.

"Economic activity in the manufacturing sector held steady supported by faster output growth and rising export orders," Leif Eskesen, chief economist for India and ASEAN at HSBC said in a release.

"Implementation of recently announced reforms will help facilitate a gradual recovery during second half of the fiscal year," Eskesen said, referring to the easing of foreign direct investment norms for retail and aviation sectors, besides the increase in diesel prices and capping of subsidised cooking gas cylinders.

The survey indicated an improvement in overall demand, with the index of new export orders rising to 53.8, the highest level since June. However, the report cautioned against the risk of unrealised orders, with raw material and finished product stocks rising faster than fresh orders.

The survey, which came out on a day when the trade data published by the commerce ministry suggested a contraction in August exports by 9.7%, indicated that the contraction in cement and steel output captured by the mere 2.1% growth in August in the core infrastructure sectors may be reversed in the coming months.

The official Index of Industrial Production data for August is expected next week.

The latest trade publication showed that though the annual imports fell by 5.1%, the decline in exports was sharper, leading to a trade deficit of $15.6 billion.

This doesn't augur well for an economy already struggling with a ballooning current account deficit which accounted to 3.9% of GDP for the first quarter this fiscal.