Growth may ease in the next few months

The 22% jump in manufacturing output was still weaker than the GDP flash estimate for manufacturing, said HSBC.

According to Leif Lybecker Eskesen and Prithviraj Srinivas, Chief Economist for India & ASEAN, and Economics Associate of HSBC, based on the figures released by EDB, the final Q1 GDP numbers could be revised down a bit. This is assuming that services and construction growth comes out in line with the flash estimates.

"Even so, that will still leave the Q1 GDP numbers well-above what was originally expected by us and consensus. So, we are still happy with our above-consensus GDP growth estimate of 5.8% y-o-y for 2011," said HSBC.

Due to the increased oil prices and the recent disaster in Japan, economic activity over the next few months is likely to register softer readings. However, that will not suffice to produce slack in the economy.

According to their analysis, the MAS was right to tighten policies in April. They also added that the additional tightening will take time to filter through to economic activity. Moreover, in the MAS's recent re-centering, the MAS left the band wide and kept the center slightly below the pre-meeting levels for the NEER, allowing for flexibility to address and cushion against downside risks to growth.

"This was slightly weaker than expected, but the pharmaceutical jumps are difficult to predict with precision. While growth will ease in coming months, capacity will remain tight and hold up inflation," said HSBC.