Feb manufacturing growth at 20-month high - PMI

India's manufacturing industry in February grew at its fastest pace in 20 months, expanding for the third month thanks to expanding output and new orders, a survey showed.

The HSBC Purchasing Managers' Index (PMI), based on a survey of 500 companies, rose to 58.5 in February, its strongest reading since June 2008, from 57.7 in January.

A reading above 50 means activity is expanding.

"At 58.5, the headline index is consistent with ongoing double-digit gains in industrial production which in turn is likely to mean that spare capacity is being eaten into rapidly," said Robert Prior-Wandesforde, Senior Asian Economist at HSBC.

"Although the output prices balance surprisingly dropped back in February, while remaining consistent with price gains, there is more and more evidence of emerging supply-side constraints in labour and product markets."

The new orders index rose to 64.0 from January's 62.9.

"While new export orders grew less strongly in February than January this didn't prevent the overall new orders series from hitting a high in the current upturn," said Prior-Wandesforde. "The same was also true of output growth, which has rarely shown such strength since the series began in April 2005."

In the 2010/11 federal budget released on Friday, the government said it expected Asia's third-biggest economy to grow faster than the 7.2 percent it forecast for this fiscal year ending on March 31. It sees growth accelerating to 8.5 percent in the 2010/11 fiscal year.