India’s manufacturing grew at the slowest pace in four months as inflation above 8 percent and nine interest-rate increases since mid-March 2010 crimped output. The Purchasing Managers’ Index fell to 57.5 in May from 58 in April, HSBC Holdings Plc and Markit Economics said in an e- mail today. A number above 50 indicates expansion. Rising borrowing costs may have begun to hurt demand, reflected in slowing sales at Maruti Suzuki India Ltd., the nation’s biggest carmaker, and Ashok Leyland Ltd. The $1.4 trillion economy grew 7.8 percent in the three months through March, the slowest pace in five quarters, a government report showed yesterday. “Even though the economy is showing signs of moderation, inflation running above 8 percent is a key problem that won’t allow the Reserve Bank of India to let its guard down,” said Sonal Varma, a Mumbai-based economist at Nomura Holdings Inc. She expects the central bank to raise interest rates by half a percentage point by the end of December. To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net. To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

Source