India: Factory output, exports show signs of life

An uptick in India's factory output suggests that the economy may be bouncing back from the year-end doldrums that drove down the benchmark Sensex. And Indian vacationers will be as pleased as the country's economic planners to note that the strong signals have had a salutary effect on the value of the rupee.

According to the HSBC manufacturing purchasing managers' index (PMI), India's manufacturing sector grew at its fastest pace in eight months in January as factory output surged the most on record on increased domestic and foreign demand, India's Economic Times reported.

However, India's exports rose a “dismal” 6.7 percent in December to $25 billion, which together with a 20 percent increase in imports resulted in a trade deficit of $12.8 billion, according to Business Standard.

That said, the manufacturing data is likely to be enough to drive the rupee above 49 to the dollar, according to Reuters.

What's it all mean? In mid-December, Indian economists were worried about a rupee crisis, in which a spiraling currency would have widened the trade gap and made the country's high deficit too expensive to be tenable.

Now, analysts have cut growth forecasts for the Indian economy to around 6.9 percent (from once lofty territory around 9 percent). But with manufacturing making a comeback and inflation gradually moderating, it looks like the worst may be over before it really got started.