India's manufacturing sector may recover soon

India is likely to witness a recovery in its manufacturing in the coming months, even though the country's industrial production contracted 2.3 per cent in March, DBS Bank has said.

"Purchasing managers' index for April has risen above the 50 mark to 53.3 suggesting industrial output expanded in sequential terms in April. Therefore, we continue to expect a recovery in manufacturing production in the months ahead," DBS Bank said.

PMI gives an indication of the country's manufacturing activity and its future outlook.

India's industrial production declined 2.3 per cent in March compared to a rise of 5.5 per cent in the same month in 2008, mainly on account of poor performance by the manufacturing sector.

"This outcome is actually not surprising and is in line with trends in the PMI survey. PMI readings have been below the neutral 50 mark in the first quarter. Importantly, the outlook for manufacturing growth in the coming quarters still is positive," the report said.

Earlier a CII-ASCON survey had also highlighted that the manufacturing sector is showing signs of recovery with key segments such as fertiliser, steel and two-wheelers returning to moderate growth from negative trends between the third and fourth quarter of 2008-09.

"There are some green shoots from a few sectors that have demonstrated a marginal pick up during the second half of 2008-09 when compared to the first half," CII director-general Chandrajit Banerjee had said.

Sectors reporting high growth are asbestos, switch gears, power cables, capacitors and industrial gases, the CII-Ascon survey had said.

Meanwhile, regarding the general elections, DBS Bank said, "Considering that no party is likely to win an outright majority. It is difficult to predict a correlation between election outcomes and policies."

However, a third front government led by the Communists might be negative for markets and policies, it added.