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The April HSBC Markit Purchasing Manager’s Index (PMI) came in at 58.0, at similar levels to the past two
months, which were at 57.9.
Amongst its components, manufacturing output and employment moved higher. The manufacturing output
sub index rose to 63.9 from 62.6 in March. The employment sub index touched 50 in April. Both input prices and
output prices moderated after a significant increase in March.
The PMI numbers have been flat in recent months, suggesting no appreciable slowdown in activity. The
recently released non-oil imports growth for March (27.7% qoq), and infrastructure index of industrial production
(7.4% yoy) suggests no significant slowdown in economic activity. Going forward, higher interest rates and a
weaker capex cycle are likely to have a negative impact on activity, in our view. We have reduced our GDP growth
forecasts for FY12 to 7.8% from 8.7% on April 21, 2011.
We expect the Reserve Bank of India (RBI) to hike by 50 bp on the repo rate on May 3, higher than
Bloomberg consensus expectations of a 25-bp hike.
We think the RBI will need to hike a cumulative 125 bp from here due to high and persistent inflation, negative real
rates, a higher-than-budgeted fiscal deficit and the need to contain second round effects of the food and energy
shocks (see India: Raising inflation and rate forecasts, reducing GDP, Asia Economics Analyst 11/08, April 21,
2011). The April PMI data supports our view that activity is still robust enough for the RBI to raise rates
aggressively in the face of much higher-than-expected inflation.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
The April HSBC Markit Purchasing Manager’s Index (PMI) came in at 58.0, at similar levels to the past two
months, which were at 57.9.
Amongst its components, manufacturing output and employment moved higher. The manufacturing output
sub index rose to 63.9 from 62.6 in March. The employment sub index touched 50 in April. Both input prices and
output prices moderated after a significant increase in March.
The PMI numbers have been flat in recent months, suggesting no appreciable slowdown in activity. The
recently released non-oil imports growth for March (27.7% qoq), and infrastructure index of industrial production
(7.4% yoy) suggests no significant slowdown in economic activity. Going forward, higher interest rates and a
weaker capex cycle are likely to have a negative impact on activity, in our view. We have reduced our GDP growth
forecasts for FY12 to 7.8% from 8.7% on April 21, 2011.
We expect the Reserve Bank of India (RBI) to hike by 50 bp on the repo rate on May 3, higher than
Bloomberg consensus expectations of a 25-bp hike.
We think the RBI will need to hike a cumulative 125 bp from here due to high and persistent inflation, negative real
rates, a higher-than-budgeted fiscal deficit and the need to contain second round effects of the food and energy
shocks (see India: Raising inflation and rate forecasts, reducing GDP, Asia Economics Analyst 11/08, April 21,
2011). The April PMI data supports our view that activity is still robust enough for the RBI to raise rates
aggressively in the face of much higher-than-expected inflation.
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