India's factory growth accelerates in May

Wednesday 03rd June 2015 06:16 EDT

India's manufacturing activity has risen the highest in the past four months in May owing to the rising domestic demand despite higher costs for firms and consumers, revealed a business survey.

The HSBC Manufacturing Purchasing Managers' Index, compiled by Markit, rose to 52.6 in May from April's 51.3. Readings above 50 usually indicate expansion and May was the 19th straight month of industrial growth.

“PMI data signalled a further robust expansion of the Indian manufacturing economy in May,” said Pollyanna De Lima, an economist at Markit. She also said the outlook of the sector is, however, clouded by a stagnant jobs market as firms remain uncertain about the sustainability of the upturn.

What also causes the RBI concern is the rate of price rises - although April inflation was well within the upper end of the Central bank's target. The Indian GDP data that released on Friday, showed the economy grow 7.3 per cent in the fiscal year of 2014-15, and expanded faster than China for the second consecutive year.

While that seems healthy there are doubts over the reliability of the data. Many economists believe that changes made earlier this year to the way government statisticians calculate GDP may have distorted the macroeconomic view.

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