>INDIA PURCHASING MANAGERS INDEX CHARTBOOK: Moderate growth amid high inflation (DECEMBER 2011)

Manufacturing and services diverge

The momentum in the manufacturing sector eased in November after briefly springing back to life in October. The pull-back was mainly led by slower growth in output and domestic orders, and partly reflected supply-disruptions due to power outages.

However, the service sector bounced back in November, with PMI readings for both business activity and new business accelerating.

Capacity constraints tightened in the manufacturing sector as reflected in rising backlogs of work and longer supplier delivery times. However, service sector companies managed to keep up with the order flow.

Both the manufacturing and services sector are growing well below their historical trends, but this did not prevent input and output prices from accelerating in both sectors.

Without a meaningful decline in inflation pressures and barring a further worsening of global economic conditions, we believe the RBI will choose to stay on hold for a while to get inflation under control.

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RISH TRADER