Indian Factory Output Rises Most in Seven Months

Jan. 4 (Bloomberg) -- India’s manufacturing output rose the most in seven months in December as exports rebounded and government stimulus stoked domestic demand for consumer goods.

HSBC Holdings Plc and Markit Economics’ Purchasing Managers’ Index stood at 55.6 last month compared with 53 in November, according to a report released today. That was the ninth monthly reading above 50, which indicates a gain in factory production.

Faster economic growth may enable Indian policy makers to start reversing emergency stimulus measures taken last year to prop up growth in Asia’s third-biggest economy. China’s manufacturing expanded at the fastest pace in more than five years in December, a report showed today, as Asian economies recover from the worst global recession since World War II.

“Concerns that growth in India’s manufacturing sector was taking a decisive turn for the worse should be allayed by this impressive release,” said Robert Prior-Wandesforde, senior Asia economist at HSBC Holdings in Singapore. “External demand is also playing an increasingly important role in driving output gains.”

Recent economic data indicate the recovery is gaining traction. Exports rose 18.2 percent in November to $13.2 billion, the first increase in 14 months, and industrial output growth accelerated to 10.3 percent in October.

Economic Stimulus

Prime Minister Manmohan Singh’s government and the central bank injected fiscal and monetary stimulus of more than 12 percent of gross domestic product between September 2008 and April 2009. That helped the economy grow 7.9 percent in the three months to Sept. 30, the fastest pace in more than a year.

India may grow as much as 8 percent in the year ending March 31, Finance Minister Pranab Mukherjee said on Dec. 23.

The prospect of faster economic expansion helped the Sensitive Index of stocks gain 81 percent in 2009, the biggest annual increase in 18 years. The Sensex rose 0.4 percent to 17,531.33 at 10.56 a.m. in Mumbai.

Record-low interest rates and tax cuts are reviving demand for cars made by Maruti Suzuki India Ltd. and Hyundai Motor Co.

“December data pointed to a substantial increase in new business received by Indian manufacturers,” Prior-Wandesforde said. The growth was driven by better economic conditions, business investments and promotional activities. “Demand from both domestic and foreign sources rose since November, although the home market remained the main driver of total new business expansion,” he said in the report.