MUMBAI (Reuters) - Indian manufacturing growth eased in April as domestic demand softened, despite factories cutting prices for the first time in nearly two years, a business survey showed on Monday.
Falling inflation and a slowing manufacturing industry would reinforce expectations that the Reserve Bank of India will again cut interest rates soon from the current 7.5 percent. "The data supports a rate cut they will continue cutting rates but slowly, perhaps waiting until the upcoming meeting,"said Pollyanna De Lima, economist at Markit.
The RBI has already cut rates twice this year. Both times it surprised markets by announcing the cuts a few days prior to its scheduled policy reviews and there is a 60 percent chance it will move ahead of the next one on June 2, a Reuters poll found last week.
The HSBC Manufacturing Purchasing Managers' Index , compiled by Markit, fell to 51.3 in April from March's 52.1 but marked its eighteenth month above the 50 level that separates growth from contraction.
Manufacturers reduced selling prices for the first time since May 2013, taking advantage of a weaker rise in the costs of their raw materials, but that failed to attract new orders.
An index monitoring new business, which highlights underlying demand, fell to 51.9 in April from 53.2. Firms also reduced staffing levels last month.
A revamp of the way India measures its economy has resulted in India's growth overtaking China's, restoring it to rank among the fastest growing in the world.
Lower interest rates and long-awaited economic reforms could spur growth further.
Data to be released at the end of this month is expected to show the economy grew 7.4 per cent during the January-March quarter, slightly slower than the 7.5 per cent reported in the last three months of 2014.