Indian manufacturing expanded at close to the slowest pace in three months last month, crimped by weaker demand that prompted the nation’s central bank to cut interest rates last month.
The Purchasing Managers’ Index was at 54.9 from 54.7 in March, HSBC Holdings Plc and Markit Economics said in an e-mailed statement yesterday. A number exceeding 50 indicates growth.
The Reserve Bank of India lowered borrowing costs last month for the first time since 2009 to spur the economy, while flagging price pressures that have sapped domestic spending and may prevent more cuts. Europe’s debt crisis has also hampered Asian factory output by hurting exports, with another report today signaling a further contraction in Chinese manufacturing.
“The pace of recovery is not really strong and demand weakness remains,” said Prasanna Ananthasubramanian, chief economist at Mumbai-based ICICI Securities Primary Dealership Ltd. “In the current quarter, the weakness will persist and the effect of the rate cut will take time to filter through.”
India is grappling with the slowest economic expansion in three years and a record trade deficit that’s pressured the rupee, as well as unprecedented borrowing to plug a fiscal gap and the fastest inflation among the biggest emerging economies.
Standard & Poor’s lowered the nation’s sovereign credit outlook to negative from stable on April 25, citing weaker investment and a deterioration in the current account, the broadest measure of trade. The move took Asia’s third-largest economy a step closer to so-called junk status.
Reserve Bank of India Governor Duvvuri Subbarao cut India’s repurchase rate by a greater-than-forecast half a percentage point on April 17 to 8 percent, after the government estimated the nation’s economy expanded 6.9 percent in the fiscal year through March, the least since 2008-2009.
Indian inflation was 6.89 percent in March, the fastest in the so-called BRIC group of major emerging markets that includes Brazil, Russia and China. The measure has eased from a level exceeding 9 percent for most of last year.
Maruti Suzuki India Ltd, the nation’s biggest carmaker, posted a 3 percent decline in fourth-quarter profit because of high raw material costs and discounts on some models.
Asia-Pacific officials are striving to navigate global risks including Europe’s protracted debt woes and elevated US unemployment while containing price pressures. The Reserve Bank of Australia on Tuesday delivered a bigger-than-forecast interest rate cut of 0.5 percentage point to boost expansion.
China’s PMI was at 49.3 last month from 48.3 in March, the sixth straight reading signaling a contraction, a separate HSBC and Markit report showed yesterday. An index released by China’s statistics bureau and logistics federation on Tuesday was at 53.3, indicating the fastest growth in a year.
Indonesia’s PMI eased to 50.5 last month from 50.8 in March, the lowest in three months, HSBC and Markit also said yesterday.
Indian Finance Minister Pranab Mukherjee said in the annual budget in March that he would aim to narrow the nation’s fiscal deficit to 5.1 percent of GDP this financial year from 5.9 percent in 2011-2012.
Funding the shortfall requires record borrowing of 5.69 trillion rupees (US$108 billion) in 2012-2013, according to government estimates.