Private sector output in India rises in February after 8 months: HSBC survey

05 March 2014

Private sector output in India expanded for the first time in 8 months in February as manufacturing grew at a stronger pace offsetting the moderation in the services sector growth, a survey by British bank HSBC has found.

The HSBC India Composite Output Index, which tracks both services and manufacturing output, stood at 50.3 in February, indicating a moderate expansion compared to the 49.6 (negative) growth in output registered in January. A PMI reading above 50 indicates growth while a lower reading means contraction.

Expansion in production was led mainly by the manufacturing sector, according to HSBC's latest survey.

The HSBC services business activity index rose from 48.3 in the previous month to 48.8 in February.

"Service sector activity continued to stabilise, but the PMI reading remains below the water line and point to weak growth conditions," HSBC Chief Economist for India & ASEAN Leif Eskesen said.

The survey found that new business places on service sector units declined in February due to weaker demand, a fragile economy and competitive pressures.

According to HSBC, while India's wholesale price inflation moderated to around 5.5 per cent levels, manufacturers passed on higher costs to the consumer, thereby raising [prices of manufactured products. This would require continued monitoring of inflation levels.

"Despite the weak growth backdrop, the RBI will have to keep its inflation guards up to address lingering inflation pressures," Eskesen said.

With 0.25 per cent increases in the Reserve Bank's policy rates thrice since September 2013 and a fiscal tightening by the central government, HSBC expects India's economic growth to remain subdued in the coming months, subdued in coming months, Eskesen added.

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