Indian manufacturing activity accelerates

NEW DELHI, May 2 (AFP): India's manufacturing activity grew at the fastest pace for five months in April, a key index showed today, raising chances of another hike in interest rates to tame inflation. The HSBC Purchasing Managers' Index (PMI), based on a survey of 500 companies, climbed to 58 in April from 57.9 the previous month, data showed. The PMI index is keenly watched as a signal of industrial growth. "The strong manufacturing PMI numbers are testament to the resilience of growth" in Asia's third-largest economy, said HSBC chief India economist Leif Eskesen. India's economy is forecast to grow nine per cent this fiscal year and the central bank has warned of capacity constraints that are fuelling inflation as factories work at full tilt and supply struggles to keep up with demand. The data comes a day ahead of a meeting of India's central bank, which is expected to hike interest rates for a ninth time in just over a year in a bid to tame stubbornly high inflation running at nearly nine per cent. "The numbers confirm that inflation and not growth is the concern, and that the Reserve Bank can continue its tightening cycle uninterrupted and with more aggressive steps," said Eskesen. The central bank has been raising rates in gradual, quarter- point steps to minimise the impact on economic growth. But inflation has remained elevated and some economists expect the central bankers to move more boldly when they meet on Tuesday. "There is a good chance that the Reserve Bank will step it up and hike rates by 50 basis points," said Eskesen. The benchmark repurchase, or repo rate, at which the bank lends to commercial banks, is currently 6.75 per cent while the reverse repo, paid to banks for deposits, is 5.75 per cent. Output growth was driven by a growth in new orders, the PMI survey showed. Purchasing activity grew substantially during April, rising at the quickest clip since January 2008.