India’s manufacturing sector grew at the slowest pace three months in March, hit by power and raw material shortages, a business survey showed on Monday.
The HSBC India Manufacturing Purchasing Managers’ Index (PMI), a key measure of factory production, eased to 54.7 in March from 56.6 in February.
A reading above 50 indicates the sector is expanding while a reading below 50 suggests contraction.
The survey comes at a time when the economy has slowed. Growth is expected to have come in at 6.9 percent for the fiscal year ended March 31, 2012, down from 8.4 percent the previous year.
“Activity in the manufacturing sector expanded at a slower pace in March led by a moderation in output and order growth, although export orders accelerated,” said HSBC’s chief economist for India, Leif Eskesen.
While manufacturers reported a marked rise in new business received in March, power and raw material shortages appear to have limited their ability to take on new business, according to HSBC.
The government forecasts India will grow 7.6 percent in the new financial year to March 31, 2013, but this is far below the eight to nine percent growth seen in much of the past decade.
The manufacturing survey showed input prices rose substantially in March, which manufacturers aimed to pass on to customers by raising their prices and raising concerns over inflation.
“Inflation was firm and upside risks remain, which will keep the Reserve Bank of India cautious about easing monetary policy,” said Eskesen
The central bank raised interest rates 13 times between March 2010 and October 2011 to in a bid to curb stubbornly high inflation, which contributed to the slowdown in the economy.
Inflation, which was nudging double digits for most of 2011, now has fallen to just under seven percent, but is still above the central bank’s