India's factory growth cooled in November yet maintained a strong pace, leading to significantly improved optimism despite demand easing a bit due to higher price pressures, a business survey found.

Asia's third-largest economy expanded a lacklustre 5.4% in the July-September quarter, official data showed on Friday, led by tepid growth in manufacturing and consumption. The rate was much lower than the 6.5% expected in a Reuters poll.

The HSBC final India manufacturing Purchasing Managers' Index, compiled by S&P Global, fell to 56.5 last month from 57.5 in October. A preliminary estimate was far higher at 57.3.

Nevertheless, the index remained above the 50-mark separating expansion from contraction and extended the growth streak to almost three and a half years.

The output and new orders sub-indexes fell to their lowest and second lowest this year, respectively. Despite slower expansion due to competition and inflationary pressures, the upturn remained substantial on strong demand.

An uptick in demand from abroad was noticed for Indian-made goods. International demand rose at the fastest pace since July.

"Strong broad-based international demand, evidenced by a four-month high in new export orders, fuelled the Indian manufacturing sector's continued growth", noted Pranjul Bhandari, chief India economist at HSBC.

High demand and capacity expansion led to a robust rise in the business outlook for the year ahead, pushing the sub-index to a six-month high.

To accelerate production firms continued to hire, albeit at a slower pace than in October.

Inflationary pressures rose with both input and output prices edging up. While cost price inflation rose at its fastest since July, the increase in output prices was the most pronounced in over 11 years.
"Input prices for a variety of intermediate goods - including chemicals, cotton, leather, and rubber - rose in November, while output prices soared ... as rising input, labour, and transportation costs were passed on to consumers", added Bhandari.

India's inflation rate rose to 6.21% in October, a 14-month high and breaching the Reserve Bank of India's target range of 2-6%. Economists pushed their forecasts of a rate cut by the central bank in December to early next year, a Reuters poll showed.

India’s economic growth slowed much more than expected in the third quarter, hampered by weaker expansions in manufacturing and consumption, likely adding pressure on the central bank (CB) for interest rate cuts.

The data is likely to put pressure on the Reserve Bank of India (RBI) to cut interest rates after holding them steady at 6.50 per cent for more than 18 months.

The latest growth data could now spur the bank to start cutting rates this year.

Year-on-year gross domestic product came in much below most analyst estimates.

The Indian economy had expanded 6.7 per cent year-on-year in the previous April-June quarter. Gross domestic output in the world’s fifth-biggest economy rose by 5.4 per cent in July-September year-on-year, data showed, the slowest pace in seven quarters and below a Reuters poll of 6.5 per cent. In the previous quarter it grew 6.7 per cent.

The gross value added (GVA), a more stable measure of economic activity, also saw a modest 5.6 per cent growth, easing from a 6.8 per cent increase in the previous quarter.

The slowdown, visible across a number of sectors, was indeed most pronounced in manufacturing, where year-on-year growth dropped to 2.2 per cent compared with 7 per cent the previous quarter.
Economists say inflation, now running at around 6 per cent, is biting into demand for goods ranging from soaps to shampoos to cars, particularly in urban areas. Private consumer spending rose 6.0 per cent from a year earlier, compared with 7.4 per cent in the previous quarter.

Sugar sector: Indian mills have produced 2.79 million metric tons of sugar since the current season began on Oct. 1, down 35.4% year on year, as mills in two key states started operations later than usual, a leading industry body said on Monday.

Lower sugar production could lead the world's second-largest producer to refrain from allocating export quotas and support global prices.

The start of sugar cane crushing in the western state of Maharashtra and neighbouring Karnataka was delayed, but soon crushing will pick up momentum, said Prakash Naiknavare, managing director of the National Federation of Cooperative Sugar Factories Ltd (NFCSF).

Maharashtra's production in the first two months of the new season fell 66% from a year ago to 460,000 tons, while Karnataka's output dropped 36% to 700,000 tons, the industry body said.
Mills in the northern state of Uttar Pradesh have produced 1.29 million tons, down 1 % from a year ago.

By the end of November, 381 sugar mills in the country had started crushing operations, compared to 433 during the same period a year ago, Naiknavare said.

India could produce 28 million tons of sugar in 2024/25, down from 31.9 million tons produced a year ago, estimates NFCSF.