Industrial Upturn Depends on Improved Policy Environment and Higher Investment Rates

The near-term industrial upturn is conditional on continued improvements in the policy environment and a quick return to peak investment rates. The HSBC India Manufacturing Purchasing Managers’ Index (PM) increased marginally from 51.3 in April to 51.4 in May, 2014. It indicates some improvement in manufacturing activities and domestic and exports orders. Lead indicators for the first two months of the current financial year for power generation and production of cement, steel, fertilizers, and coal show improvement. Railways freight earnings and exports have also picked up, raising hopes of increased industrial activity in the coming months. The index of eight core infrastructural supporting industries registered a growth of 4.2 per cent in April 2014 as compared to 3.7 per cent growth recorded in April, 2013. Further IIP-based overall industrial growth was 3.4 per cent in April 2014 as compared to the 1.5 per cent growth recorded in April, 2013.

With the improvement in overall macroeconomic environment, industry is expected to revive and growth can accelerate gradually over the next two years.