Reading Comprehension Practice 16

Reading Comprehension Practice

India's manufacturing growth fell to its lowest in more than two years in September 2011, reinforcing fears that an extended period of high policy rates is hurting growth, according to a closely vatched index.

The HSBC India Purchasing Managers' Index (PMI), based on a survey of over 500 companies, fell to 50.4 from 52.6 in August and 53.6 in July. It was the lowest since March 2009, when the reading was below 50, indicating contraction. September's index also recorded the biggest one-month fall since November 2008.

The sub index for new orders, which reflects future output, declined for the sixth successive month, while export orders fell for a third month on the back of weakness in global economy.

The Reserve Bank of India (RBI) last week indicated it was not done yet with monetary policy tightening as inflation was still high. The bank has already raised rates 12 times since March 2010 to tame inflation, which is at a 13-month high of 9.78%.

Economists expect the RBI to raise rates one more time but warn that targeted growth will be hard to achieve if the slump continues. "This (fall in PMI) was driven by weaker orders, with export orders still contracting due to the weaker global economic conditions," HSBC said in a press release quoting its chief economist for India & ASEAN.

PMI is considered a fairly good indicator of manufacturing activity the world over, but in the case of India, the large contribution of the unorganised sector yields a low correlation with industrial growth.

However, the Index for Industrial Production (IIP) has been showing a weakening trend, having slipped to a 21-month low of 3.3% in July. The core sector, which consists of eight infrastructure industries and has a combined weight of 37.9% in the IIP, also grew at only 3.5% in August.

The PMI data is in line with the suffering manufacturing activity in India as per other estimates. Producers are seeing that demand conditions are softening and the outlook is uncertain, therefore they are producing less.

Employment in the manufacturing sector declined for the second consecutive month, indicating it too was under pressure. This could be attributed to lower requirement of staff and rise in resignations as higher wage requests go unfulfilled, the HSBC statement said.

On the inflation front, input prices rose at an 11-month low rate, but despite signs of softening they still remain at historically high levels.

While decelerating slightly, the readings for input and output prices suggest that inflation pressures remain firmly in place.

Most economists feel the RBI is close to the end of its rate hike cycle. Even the weekly Wholesale Price Index (WPI) estimates have started showing signs of softening, having fallen more than one percentage point.

36. The PMI is based on surveys of

(a) Individual Consumers

(b) Companies

(c) Countries

(d) Economists

(e) Banks

37. Which year did PMI record the biggest one-month fall since

2008?

(a) 2008 (c) 2010

(b)2009

(c) 2010

(d)2011

(e) None of these

38. Which of the following explains the phrase, as used in the

passage, "it was not done yet"?

(a) It is over now

(b) There is no hope

(c) There is still hope

(d) Rates will be further raised

(e) PMI will further fall

39. Which of the following is indicated by the sub/index for

new orders?

(a) Export orders

(b) WPI

(c) Inflation

(d) Output price

(e) Future output

40. How many Companies are included in PMI data from India?

(a) About 100

(b)Less than 10

(c) Between 100 to 300

(d)More than 500

(e) More than 10,000

41. Which of the following is the prediction of economists

about RBI's rate hike cycle, as per the passage?

(a) There will not be many rate hikes

(b) The Rate reduction cycle will start soon 

(c) There will be many more rate hikes

(d) Not indicated in the passage

(e) None of these

42. Which of the following is not true about PMI data in India?

(a) It reflects decline in manufacturing

(b) In September 2011, PMI was 50.4

(c) Reduction is export orders affected PMI.

 (d) Other related estimates support PMI data. 

(e) PMI data is reported once in 3 months.

43. PMI is used

(a) Only in India

(b) World over

(c) Only in ASEAN countries

(d) Only in developed countries

(e) Only in developing countries

44. Which of the following is indicated as one of the reasons

for the fall in PMI?

(a) Less number of orders were placed.

(b) Unorganized sector failed to give the required results.

(c) Industrial unrest reduced manufacturing.

(d) RBI has stopped raising the rates.

(e) WPI has shown signs of softening.

45. Which of the following is correct in the context of the passage?

(a) India's manufacturing growth was the lowest in 2010

(b) PMI is not affected by high policy rates

(c) Employment in manufacturing sector was also affected adversely

(d) The input prices were lowest in 2011 as compared to earlier years

(e) IIP was 37.9% in August

Answer: -

1.B

2.B

3.D

4.E

5.D

6.A

7.E

8.B

9.A

10.C