Economists cut growth estimates, manufacturing shrinks
NEW
DELHI: The manufacturing sector continued to remain in distress. A
survey showed the sector contracted for the first time since March 2009,
adding to the woes of the Indian economy, which is battling a sharp
slowdown and a volatile currency. Several economists and brokerages
slashed their growth estimates for the current financial year, piling
fresh pressure on policymakers. Top US bank JPMorgan cut the growth
estimate from 5.1% to 4.1%, while global financial services firm Nomura
expects the economy to grow 4.2% in 2013-14 . Bank of America Merrill
Lynch said growth was estimated to be 4% "in a stress case scenario ."
Emerging markets have been hit hard by financial market turmoil after
the US Fedindicated that it may taper off its fiscal stimulus.
The wave of downgrades in growth estimates follow Friday's data, which showed the economy slowed to a fouryear low of 4.4% in the June quarter dragged by the manufacturing and mining sectors. According to the PMI survey, business conditions in the manufacturing sector deteriorated during August for the first time in over four years, with both output and new orders falling at faster rates. Export orders also declined, ending an 11-month sequence of growth. The PMI fell from 50.1 to 48.5 in August, indicating a moderate deterioration in business conditions. The latest index reading was the lowest in four-and-a-half years and the first sub-50 .0 reading since March 2009. The 50 point mark divides growth from contraction.
"Manufacturing activity contracted in August for the first time since March 2009. This was led by a decline in new orders, especially export orders. Together with a drawdown in finished goods inventories , this led to a drop in output ," Leif Esekesen, chief economist for India andAsean at HSBC said. "Notwithstanding the weak growth backdrop , RBI will likely keep its liquidity tightening measures in place for a while to help contain the depreciation of the currency. Combined with the heightened macroeconomic uncertainty, this will continue to weigh on growth in coming months," Eseksen said
The wave of downgrades in growth estimates follow Friday's data, which showed the economy slowed to a fouryear low of 4.4% in the June quarter dragged by the manufacturing and mining sectors. According to the PMI survey, business conditions in the manufacturing sector deteriorated during August for the first time in over four years, with both output and new orders falling at faster rates. Export orders also declined, ending an 11-month sequence of growth. The PMI fell from 50.1 to 48.5 in August, indicating a moderate deterioration in business conditions. The latest index reading was the lowest in four-and-a-half years and the first sub-50 .0 reading since March 2009. The 50 point mark divides growth from contraction.
"Manufacturing activity contracted in August for the first time since March 2009. This was led by a decline in new orders, especially export orders. Together with a drawdown in finished goods inventories , this led to a drop in output ," Leif Esekesen, chief economist for India andAsean at HSBC said. "Notwithstanding the weak growth backdrop , RBI will likely keep its liquidity tightening measures in place for a while to help contain the depreciation of the currency. Combined with the heightened macroeconomic uncertainty, this will continue to weigh on growth in coming months," Eseksen said
RANJAY KUMAR
PGDM
No comments:
Post a Comment