India manufacturing rises; off-cycle rate move unlikely

India's manufacturing in January grew at its fastest pace in almost 18 months, driven by a sharp rise in new export orders that are supporting a recovery in the industrial sector, a survey showed on Monday. The central bank, meanwhile, will only adjust monetary policy outside of its quarterly review cycle under extraordinary circumstances, a deputy governor said, meaning its next move is likely to occur only in April, even as inflation mounts. The HSBC Markit Purchasing Managers' Index (PMI) , based on a survey of 500 companies, rose to 57.7 in January, its strongest reading since August 2008 and up from 55.6 in December. "Any lingering concern that India's manufacturing recovery was tailing off should be well and truly put to rest by this strong release," said Robert Prior-Wandesforde, senior Asian economist at HSBC in Singapore.Exports continued to rebound, rising an annual 9.3% in December to USD 14.6 billion, their second consecutive monthly rise, although the pace of annual growth was slower than the 18.2% registered in November. The export figure, released on Monday, was initially revealed by the trade minister on Jan. 11.Imports increased by 27.2% in December from a year earlier to USD 24.75 billion while the trade deficit shrunk by a little over 28% to USD 76.24 billion for the April- December 2009 period.India's benchmark 10-year bond yield closed on Monday at 7.63%, rising after central bank Governor Duvvuri Subbarrao said yields would rise if government borrowing in the next fiscal year exceeds central bank expectations. Indian stocks ended flat.
Off cylce policy move unlikely
On Friday, the Reserve Bank of India (RBI) raised the cash reserve ratio for banks by a higher-than-expected 75 basis points in an effort to soak up excess liquidity, and ramped up its forecast for GDP growth in the current fiscal year through March to 7.5% from its earlier forecast of 6%. Some analysts had predicted the central bank's next move would be a rate hike before its next review, scheduled for April 20, as inflation rises and economic recovery gains strength. But on Monday, Deputy RBI Governor Subir Gokarn said that an off-cycle policy change would come only in reaction to unforeseen circumstances. The bank's next policy review is set for April 20. "A mid-policy action is really in response to a completely unanticipated event," he said during a conference call from the southern Indian city of Chennai.

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