Indian manufacturing sector grow faster due to post election boost to business
Picture for representational purpose
New Delhi: Greens shoots are emerging in the economy. India’s manufacturing sector grew fastest in 17 months in July due to post-election boost to business and consumer sentiments, according to HSBC Manufacturing Purchasing Managers’ Index released on Friday. Even auto majors reported good sales number for July on Friday. This is in sharp contrast when few months back car companies were struggling due to poor demand. Car sales in India had fallen for the second consecutive fiscal in 2013-14.
India’s largest carmaker Maruti Suzuki India reported 20 per cent increase in domestic sales in July and second largest car company Hyundai Motor India posted a growth of 12.69 per cent in its domestic sales. This comes on back of data released on Thursday showing that core infra sector grew fastest in 17-months in June at 7.2 per cent. It will push up the industrial production growth number to be released on August 12, as core infra sector has weight of about 37.90 per cent in the Index of Industrial Production (IIP).
What has also helped is that crude oil prices have fallen to pre-Iraq crisis level as fear of disruption in global supplies didn’t materialised. As a result, companies cut down petrol prices on Thursday midnight and under-recovery on diesel has dipped to all-time low of Rs 1.33 a litre from Rs 2.49 last month. Diesel will get deregulated in three months if there is no spike in international oil prices, which will bring down fuel subsidy burden.
There has also been some revival in the monsoon, and rainfall deficiency has narrowed to 24 per cent from 40 percent, according to Citi Research report released on Wednesday. However, crop sowing is still down.“Green Shoots in manufacturing bode well for FY15 growth,” said a separate Citi Research on Friday. The HSBC Manufacturing PMI rose to 53 in July from 51.5 in June, its highest since February 2013. A reading above 50 means a positive growth.
“Finally, manufacturing momentum has picked up steam, resulting from a post-election boost to business and consumer sentiment. It’s not just domestic demand. The pick-up in export demand since the beginning of this year has been of huge help, too,” said HSBC Co-Head of Asian Economic Research, Frederic Neumann.
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