After remaining sluggish for a significant period, India's manufacturing sector – mainly comprising energy, cement, steel and fertilizer – rises to a four-month high in October, along with signs of recovery in car sales and factory activity hitting a near two-year high in November. The core sector grew an annual 6.3% in October compared to 1.9% expansion in the previous month and a decline of 0.1% in October 2013. The sharp rebound, which augurs well for industrial output data due later in the month, was powered by coal and electricity sectors, which posted strong expansion. Three sectors - cement, fertilizer and natural gas - remained sluggish.
Separate data showed the manufacturing activity hit a near two-year high in November on the back of strong foreign and domestic orders. Rising from 51.6 to 53.3, the HSBC Purchasing Managers Index (PMI) reached a 21-month high in November, the 13th consecutive month of expansion.
Car sales recovered after two straight months of decline in November, providing some relief to the sector weighed down by slowing demand and high interest rates. Sales for the car industry had slackened in the festive months of September and October, and year-on-year volumes were negative. Wholesale deliveries were down 1% in September compared to 3% in October.
A few companies as well as industry body, Society of Indian Automobile Manufacturers (Siam) fear that sales may slip into the negative for the third year in a row if the economy does not pick up in pace and excise duty relief packages are not extended. High interest rates have been a key factor behind the decline in the car industry for the last nearly three years.
However, the players are still worried as sales have been up only 3% in the April-October 2014-15 period. “There are not many changes in the fundamentals. So, sustaining this growth rate will be a challenge,“ said Rakesh Srivastava, senior VP (sales & marketing) at Hyundai India.
R C Bhargava, chairman of Maruti Suzuki, said the market conditions still remain tough and it would be sometime before a full recovery can be announced. “The situation is not as bright as many had hoped for.”
