India factory output climbs to four-month high in May
India’s factory output rose to a four-month high in May on increased demand, a survey showed Monday, in a further boost for the economy after data showed it was outgrowing China. Banking giant HSBC said its purchasing managers index (PMI) increased to 52.6 points last month from 51.3 in April.
May’s number was the best since the 52.9 recorded in January but was still some way short of the two-year high of 54.5 in December.
According to the survey, seen as a harbinger of industrial expansion and economic health, a reading of more than 50 points suggests expansion while anything below indicates contraction.
“PMI data signaled a further robust expansion of the Indian manufacturing economy in May,” said Pollyanna De Lima, an economist at Markit financial services.
Government data released Friday showed India’s economy grew at 7.3 percent in the last financial year. It grew by 7.5 percent yearon-year for the first three months of 2015, according to the figures, outpacing China. Monday’s survey showed demand had picked up in key sectors of the economy, including consumer and capital goods.
But De Lima warned that the rise may not be sustainable as India has yet to see a growth in job creation.
The economist hinted that the Reserve Bank of India (RBI) could boost the economy by lowering interest rates for the third time this year when it meets on Tuesday.
Modi’s right-wing government, which swept to power in general elections in May 2014 on pledges to boost a flagging economy, wants RBI governor Raghuram Rajan to slice more points off the benchmark repo rate, the level at which it lends to commercial banks.
The governor has so far made controlling inflation a priority, and it is well within the RBI’s target of six percent, increasing the likelihood of a rate cut.