Mumbai: Indian manufacturing expanded at the fastest pace in four months in June, a private survey showed, after the central bank reduced interest rates earlier in the year to boost a struggling economy.
The purchasing managers’ index climbed to 55 last month from 54.8 in May, HSBC Holdings Plc and Markit Economics said in an e-mailed statement today. A number above 50 indicates growth.
The Reserve Bank of India cut borrowing costs in April for the first time since 2009 after the expansion in Asia’s third-largest economy slowed to a near-decade low. Faster growth in India’s PMI contrasts with readings signalling contraction last month in nations from China to South Korea as the debt crisis in Europe saps demand for Asian exports.
“By October growth could recover somewhat” if Prime Minister Manmohan Singh implements stalled reforms and improves sentiment after taking charge of the finance ministry last week, N. R. Bhanumurthy, an economist at the National Institute for Public Finance and Policy in New Delhi, said before the release.
The rupee, which has slumped 20 per cent against the dollar in the past year as India’s economic outlook deteriorated, weakened 0.2 per cent to 55.74 per dollar as of 10.32am in Mumbai. The BSE India Sensitive Index was down 0.2 per cent. The yield on the 8.15 per cent bond due on June 2022 rose two basis points, or 0.02 percentage point, to 8.20 per cent.
Singh has pledged to restore confidence in a nation facing a record current-account deficit, unprecedented borrowing needs to plug a budget shortfall and political gridlock that has deterred investment. India’s May inflation rate was 7.55 per cent, the highest among the biggest emerging markets.
Gross domestic product growth slowed to 5.3 per cent in the three months through March from a year earlier, the least since 2003. The central bank has signalled lingering price pressures from government spending and the weaker rupee may limit room for further interest-rate cuts to bolster the economy.
The manufacturing PMI for China was at 48.2 in June, according to HSBC and Markit. The gauges for South Korea and Taiwan were also below 50, while Indonesia’s was at 50.2.
