HSBC manufacturing PMI unchanged in April at 51.3

There is less encouraging news from India's factories. Manufacturing production continues to remains sluggish in the country with moderate expansion of new businesses and lower output. These have resulted from competitive pressures as well as power outages, a survey signals.

The HSBC India Purchasing Managers' Index (PMI) for April was at 51.3, unchanged from the previous month. That indicates modest growth even as factories reported  improving operating conditions in April.

The PMI, compiled by Markit, a financial information services company, is based on data from monthly survey of  purchasing executives in over 500 manufacturing companies.

While new orders received by Indian manufacturers grew in April, the overall pace of expansion eased since March. Besdies increased competition, the ongoing general elections appears to have derailed growth. New business orders inched up at consumer and intermediate goods producers; the investment goods sub-sector declined.

Growth of new export orders also eased since March with capital goods producers recording lower foreign orders in April. This is quite a change from the previous month when manufacturers reported the strongest export orders since April 2011.

Another concern is the built up in inventory, reflective of the poor demand environment. Both pre- and post-production stocks rose in April. Holdings of raw materials and semi-manufactured goods rose for the first time in five months. Inventories of manufactured goods expanded the quickest since September 2012, the survey shows.

"The momentum in the manufacturing sector held broadly steady, with domestic demand countering a slowdown in export orders. However, a build-up in finished goods inventories could weigh on output growth in coming months in the absence of a pick-up in demand. Encouragingly, inflation pressures eased, but that does not mean that the RBI can take down its inflation guards." Leif Eskesen, Chief Economist for India & ASEAN at HSBC, noted in a press statement.

Manufacturing momentum in India has been easing since March after showing signs of recovery in February - the PMI rose to 52.5 in the month, a one-year high.