Power Cuts Darken India's Growth

Persistent power cuts held back India’s manufacturers in March. Though conditions improved, the seasonally adjusted HSBC Purchasing Managers’ Index (PMI) was 52.0, the lowest figure for 16 months, and down from 54.2 in February.


“Manufacturing activity lost momentum in March, with output growth slowing notably on the back of a deceleration in new orders and power outages,” says Leif Eskesen, Chief Economist for India and ASEAN at HSBC.


Manufacturers ran down their stock levels to meet demand because power cuts caused disruption to day-to-day production. However, output still increased, albeit modestly.


“This suggests that output could get a lift in coming months as inventories are replenished,” notes Eskesen.


“Encouragingly, input and output price inflation eased. Even so, the scope for further monetary policy easing remains limited.”


Input prices rose at the slowest rate for 32 months, and output prices increased at the slowest rate since October. Firms indicated that competition from other companies had prevented them from passing on cost increases in full.


The rate of job creation was the fastest since October, according to the PMI. Growth in new orders was moderate and the slowest for 16 months. Export orders rose slightly.


PMIs are a monthly indicator of economic trends. The survey is based on responses from purchasing executives in more than 420 manufacturing companies. Any figure above 50.0 signals expansion, while below 50.0 indicates contraction.


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