Bloomberg Anywhere Login


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

India Manufacturing Quickens, Weathers Record Rate Increases

Workers assemble motorcycle engines on the production line at the Honda Motorcycle & Scooter India Pvt. plant in Manesar, India. Photographer: Prashanth Vishwanathan/Bloomberg
Workers assemble motorcycle engines on the production line at the Honda Motorcycle & Scooter India Pvt. plant in Manesar, India. Photographer: Prashanth Vishwanathan/Bloomberg

Nov. 1 (Bloomberg) -- India’s manufacturing accelerated in October, a sign the economy is weathering record interest-rate increases and a faltering global recovery.

The Purchasing Managers’ Index rose to 52 from 50.4 in September, HSBC Holdings Plc and Markit Economics said in an e-mailed statement today. Readings above 50 indicate expansion.

The Reserve Bank of India last week signaled it’s nearing the end of monetary tightening after it raised rates for the 13th time since mid-March 2010, seeking to support growth as Europe’s debt crisis clouds the outlook for exports. In China, a manufacturing index dropped to the lowest level since February 2009, bolstering the case for fiscal or monetary loosening.

“Indian manufacturing bounced back on resilient domestic demand, but is still expanding at a historically slow pace,” said Leif Eskesen, a Singapore-based economist at HSBC.

The yield on the 7.80 percent government bond due April 2021 climbed 7 basis points, or 0.07 percentage point, to 8.95 percent as of 12:09 p.m. in Mumbai. The BSE India Sensitive Index fell 0.8 percent. The rupee weakened 0.7 percent to 49.05 against the dollar.

Governor Duvvuri Subbarao has increased the central bank’s repurchase rate by 375 basis points since mid-March 2010 to tame inflation that has exceeded 9 percent since the start of December. That’s the fastest round of increases since the central bank was established in 1935, Bloomberg data show. The repurchase rate is 8.5 percent.

Capital Expansion

“The high interest rates may lead to delays or deferment of capital expansion plans,” Ravi Sud, chief financial officer at Hero MotoCorp Ltd., India’s largest motorcycle maker, said on Oct. 25. “Down the line, when inflation is under control, and global factors such as the European situation become normal and when the industry starts to grow, there may be a capacity shortage.”

Inflation in India is being stoked by higher food and fuel costs and the rupee, which has weakened 8.7 percent since Jan. 1, the worst performer in Asia.

The government’s “large” budget deficit has also been an “important source” of demand pressure, the central bank said Oct. 25. India’s budget shortfall in the six months through September was 70.8 percent of the annual goal, the Controller General of Accounts said yesterday.

Growth Forecast

India’s central bank last week reiterated that monetary tightening would help slow the benchmark wholesale-price inflation to 7 percent by March 31. It also cut India’s growth forecast to 7.6 percent from 8 percent for the fiscal year ending March 31.

The likelihood of a rate action in the December policy meeting is “relatively low” Subbarao said last week. He said the central bank gave the rate guidance to help boost investment.

“Any further rate hike in India would hurt growth severely,” Jay Shankar, Mumbai-based chief economist at Religare Capital Markets Ltd., said before the report. “Investment in India has been curbed by the rate increases.”

Officials from China to South Korea have refrained from raising rates in recent weeks as Europe’s debt crisis dims the outlook for exports.

In China, the Purchasing Managers’ Index fell to 50.4 in October from 51.2 in September, the China Federation of Logistics and Purchasing said in a statement today.

India’s merchandise export growth slowed for a second straight month in September. Shipments rose 36.4 percent from a year earlier to $24.8 billion, the commerce ministry said in a statement today. Exports gained 44.25 percent in August.

India’s inflation will start to decline from December and ease to 7 percent by March before moderating further in the first half of the new fiscal year starting April 1, according to the central bank. Beyond December, “if the inflation trajectory conforms to projections, further rate hikes may not be warranted,” the bank said last week.

To contact the reporter on this story: Unni Krishnan in New Delhi at

To contact the editor responsible for this story: Shamim Adam in Singapore at

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.