New Delhi: India's private sector output grew marginally in April due to rise in new business orders, but price pressures remained firm, limiting the Reserve Bank of India's scope to further cut key policy rate after an "aggressive" and rather "premature" 50-basis points reduction earlier last month, as per an HSBC and Markit Economics survey of purchasing managers.
The HSBC India Composite PMI -- which covers both the manufacturing and service sectors -- inched up to 53.8 in April from 53.5 recorded in March, the survey said.
HSBC Services Business Activity Index -- a headline index that indicates the overall health of an economy's services sector -- posted 52.8 in April, showing a rise of 0.5% from 52.3 in March.
A reading above 50 shows expansion while below 50 indicates contraction.
"The level of incoming new business placed at Indian service providers rose in April, extending the current period of expansion to three years... With new work placed at manufacturers rising at a faster rate in April, the rate of new business growth at the composite level accelerated since March," it said.
However, the Indian service providers continued to pass on higher costs to customers by increasing the output charges in April. Also, the average input costs of service providers increased significantly in the month of April, with the composite data pointing towards a sharp rise in input prices, the fastest since January, which indicated the cost pressures faced by manufacturers, the survey said.
"Price pressures remained firm as rising input costs, mostly wages, were passed on to prices charged," Leif Eskesen, chief economist for India & ASEAN at HSBC, said in the statement.
India's wholesale price index (WPI) rose 6.89% on-year in March marginally slower than the 6.95% yearly rise recorded in February, which is still higher than the RBI's comfort level of 5%-6%.
"Together with the April readings for manufacturing PMI these numbers suggest that inflation risks should remain a key concern for the RBI. This also means that the scope for further rate cuts is very limited, in our view, especially following the somewhat premature and too aggressive rate cut in April," Eskesen added.
Last month, the RBI cut the repo rate -- short term lending rate -- by a sharper-than-expected 50 basis points to 8% for the first time since 2009, to support India's faltering economic growth.
Earlier, the RBI had raised the repo rate by 375 basis points in 13 sequential steps between March 2010 and October 2011, to tame stubbornly high inflation, until it pressed the pause button in December to address concerns about deterioration economic growth.
Meanwhile, the Indian government has projected the country's gross domestic product (GDP) to grow a little higher at 7.6% in the current financial year 2012-13 on the back of expected pick up in industrial production against 6.9% seen for the last fiscal.
HSBC Markit Business Activity Index is based on a survey of around 350 private firms, while composite PMI is based on original survey data collected from a representative panel of over 800 companies based in the Indian manufacturing and service sectors.
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