(Updates with export data in 15th paragraph.)
Oct. 3 (Bloomberg) -- India’s manufacturing grew in September at the slowest pace in 2 1/2 years after the central bank’s record interest-rate increases.
The Purchasing Managers’ Index was at 50.4 from 52.6 in August, HSBC Holdings Plc and Markit Economics said in an e- mailed statement today. That’s the weakest reading since March 2009. A number above 50 indicates expansion.
The Reserve Bank of India last week signaled it may maintain its tight monetary policy after Governor Duvvuri Subbarao said inflation remains above the acceptable level. In China, a manufacturing index advanced for a second month, suggesting the world’s second-largest economy is weathering Premier Wen Jiabao’s steps to check price gains.
“Inflation control would continue to be the dominant theme and goal in India,” Ramya Suryanarayanan, an economist at DBS Group Holdings Ltd. in Singapore, said before the report. “The sheer size of the rupee’s move makes imports costly and adds to price pressure.”
She expects the central bank to increase its repurchase rate by a quarter of a percentage point to 8.5 percent by the end of December. Subbarao has raised the benchmark rate 12 times since mid-March 2010 by a total of 350 basis points, the fastest round of increases since the Reserve Bank was established in 1935, Bloomberg data show.
The Indian rupee has weakened 9.5 percent against the dollar this year, the biggest drop in a basket of 10 Asian currencies excluding Japan’s yen, according to Bloomberg data, as investors sold emerging-market assets on concern Europe’s debt crisis may undermine the global economy.
The currency fell 0.9 percent to 49.38 as of 12.21 p.m. in Mumbai today. The Bombay Stock Exchange Sensitive Index slumped 2.2 percent. The yield on the 7.8 percent securities due April 2021 gained 7 basis points, or 0.07 percentage point, to 8.51 percent.
India’s benchmark wholesale-price inflation accelerated to a 13-month high of 9.78 percent in August.
Inflation may accelerate after Indian Oil Corp., the country’s biggest refiner, raised gasoline prices in September for the second time in four months. Losses from selling fuels below cost are increasing following the rupee’s decline against the dollar, according to the company’s Finance Director P.K. Goyal.
India needs to control rising prices to protect purchasing power and sustain growth, the Reserve Bank has said.
A rate of 4 percent to 6 percent is the “short-term comfort range” for inflation, Subbarao said Sept. 26. He said inflation will slow by March 2012, “but more slowly than initially expected.” Subbarao in July predicted inflation to ease to 7 percent by March 31.
The China Federation of Logistics and Purchasing said Oct. 1 that the Purchasing Managers’ Index for September rose to 51.2 from 50.9, showing the economy is withstanding the government’s campaign against inflation that has included higher interest rates, lending curbs and home-purchase limits.
In Australia, a gauge of manufacturing fell for a third month in September as a surging currency hurt exports and the highest borrowing costs in the developed world curbed domestic demand.
The International Monetary Fund last month cut its forecast for India’s economic growth. The South Asian economy will expand 7.8 percent in 2011, the Washington-based lender said, slower than the 8.2 percent projected in June. For 2012, it lowered its estimate to 7.5 percent from 7.8 percent.
Merchandise exports growth slowed in August, gaining 44.3 percent to $24.3 billion from a year earlier, according to an e- mailed statement from the commerce ministry today. Exports jumped 81.8 percent in July, the biggest increase since at least April 1995, Bloomberg data show.
--Editors: Cherian Thomas, Sunil Jagtiani
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