The headline HSBC India Purchasing Managers Index (PMI) -- a composite gauge designed to give a single-figure snapshot of manufacturing business conditions -- rebounded from Septembers nine-month low of 51.0 to 51.6 in October.
Amid reports of stronger demand, production at Indian manufacturers rose for the twelfth successive month in October. A figure above 50 indicates the sector is expanding, while a figure below that level means contraction.
Manufacturing activity picked up modestly amid stronger output and new order flows, particularly from overseas clients, HSBC Co-Head of Asian Economic Research Frederic Neumann said.
New business also increased for the twelfth month in a row in October, largely owing to the general improvements in demand situation.
In addition, export orders received by Indian manufacturers rose in October, extending the current sequence of growth to 13 months.
However, firms continued to trim purchases and refrained from aggressive inventory accumulation, the report said.
On prices, it said that inflationary pressures remained muted in October. While input prices eased further, the improvement in growth allowed firms to raise margins by increasing output prices slightly.
This trend could strengthen with growth, which is why the RBI will remain cautious about relaxing its grip at this juncture, Neumann said.
In the September policy review, Reserve Bank Governor Raghuram Rajan had left all key rates unchanged citing continued risks to inflation and difficult external situation, especially on the geopolitical front. This was the fourth consecutive time that the RBI kept key interest rates unaltered.
The short-term lending (repo) rate remained at eight per cent, and the cash reserve requirement of banks at four per cent.
By MATTHEW CRAFT
AP Business Writer
NEW YORK -- Soaring inflation. A collapsing dollar. Bubbles in financial markets that would soon pop. One presidential candidate even suggested that the Federal Reserve chairman should be roughed up.
Over the past five years, as the Fed has pumped ever-more money into the financial system, critics have warned that it would lead to all kinds of disasters. Yet the central bank kept extending its bond-buying program, known by the wonky name of quantitative easing, or QE. It was an unprecedented effort aimed at lowering borrowing costs, encouraging spending and reviving a dormant economy before it could slip back into recession.
Now, $4 trillion later, QE is drawing to a close, so the question is: Did it work?
Economists have plenty of quibbles, but many agree that the Fed accomplished the bulk of its goals.
Look at us now, says Anthony Chan, chief economist for Chase Private Client in New York. All of the jobs lost during the financial crisis have been recovered. The stock market has more than doubled, and inflation has remained tame.
I have to say it was a pretty impressive success, Chan says. But other people define success differently.
At the tail end of 2008, the Fed cut its short-term lending rate to a record low to spur growth, then made an historic move.
At the tail end of 2008, the Fed cut its benchmark short-term lending rate to a record low to spur growth, then made a historic move. It began the first round of QE, buying $100 billion in bonds backed by mortgages every month. The Bush administration had already hatched a number of rescue programs aimed at patching up the banking system, and so the Feds initial step met little resistance.
But the Feds second round of quantitative easing, dubbed QE2, received a hostile reception.
In late August 2010, the economy had slowed to a crawl, and the big worry was deflation - a dangerous spiral of falling prices and wages. During a speech that month in Jackson, Wyo., Fed Chairman Ben Bernanke outlined a turnaround plan.
The Fed began buying $600 billion in US government bonds that November to loud protests.
QE3 followed the next year, and the heated rhetoric increased.
House Speaker John Boehner argued that the Fed risked creating hard-to-control inflation, a weak dollar, and market bubbles. After entering the presidential campaign in 2011, Texas Gov. Rick Perry said it would be almost treasonous if Bernanke prints more money ahead of the election. Perry told an Iowa crowd, We would treat him pretty ugly down in Texas.
Heres what actually happened since Bernanke made the case for the Feds expanded effort in August 2010:
The unemployment rate has fallen to 5.9 percent, the lowest level since July 2008. In August 2010, it was 9.6 percent.
The stock market has soared. The Standard Poors 500 index has returned 101 percent, powered by a stronger economy, higher spending, and record corporate profits.
The dollar has held up against most major currencies. One widely used measure, the dollar index, is 3 percent higher.
Inflation has remained tame, despite all the warnings. Over the last year, overall prices have climbed a modest 1.7 percent, still below the 2 percent annual increase that the Fed targets.
Many on Wall Street have faith that the central bank will raise interest rates slowly enough to not derail the recovery.
But some economists still worry that the economy wont be ready when the Fed decides to start raising rates. The logic of a rate hike is that employment is taking off and the Fed needs to cool the economy down, says Dean Baker, codirector of the Center for Economic and Policy Research, a liberal Washington think tank. Were so far from that.
Even some optimists expect more market turbulence as the Fed moves closer to its first interest rate hike since 2006.
BY THE NUMBERS
Gain in SP
Rise in dollar index
The New York Times is again on the warpath against what it calls predatory lending.
Just what is predatory lending? It is lending that charges a higher interest rate than people like those at the New York Times approve of. According to such thinking -- or lack of thinking -- the answer is to have the government set an interest rate ceiling at a level that will be acceptable to third parties like the New York Times.
People who believe in government-set price controls -- whether on interest rates charged for loans, rents charged for housing or wages paid under minimum wage laws -- seem to think that this is the end of the story. Yet there is a vast literature on the economic repercussions of price controls.
Whole books have been written just on the repercussions of rent control laws in countries around the world.
These repercussions include the housing shortages that almost invariably follow, the deterioration of existing housing and the shift of economic resources -- both construction materials and construction labor -- from building ordinary housing for the general public to building luxury housing that only the affluent and the rich can afford, because that kind of housing is usually exempted from rent control.
There is at least an equally vast literature on the repercussions of minimum wage laws. Unemployment rates over 20 percent for younger, less skilled and less experienced workers have been common, even in normal times -- with much higher unemployment rates than that during recessions.
Against this background of negative repercussions from various forms of price control, in countries around the world, why would anybody imagine that price controls on interest rates would not have repercussions that need to be considered?
Yet there is remarkably little concern on the political left as to the actual consequences of the laws and policies they advocate. Once they have taken a stance on the side of the angels against the forces of evil, that is the end of the story, as far as they are concerned.
Low-income people often get short-term loans when they run out of money to meet some exigency of the moment. The interest rates charged on such unsecured loans to people with low credit scores are usually higher than on loans to people whose higher incomes and better credit histories make them less of a risk.
Crusaders against such loans often make the interest rate charged seem even higher by quoting these interest rates in annual terms, even when the loan is actually repayable in a matter of weeks. It is like saying that a $100 a night hotel room costs $36,500 a year, when virtually nobody rents a hotel room for a year.
Because those who make unsecured short-term loans are usually poor and often ill-educated, the political left can cast the high interest rates as unconscionably taking advantage of vulnerable people. But similar economic principles apply to more upscale short-term lending to well-educated people who have valuable possessions to use as collateral.
Editorial demagoguery against predatory lending might well be called predatory journalism -- taking advantage of other peoples ignorance of economics to score ideological points, and promote still more expansion of government powers that limit the options of poor people especially, who have few options already.