Amid the disappointing macroeconomic numbers, the HSBC Purchasing Managers’ Index (PMI) for the manufacturing sector in India might give some cheer to policy makers. It rose to a six-month high in December, at 54.7 points, from 53.7 in November.
In fact, the November level was a five-month high. A PMI reading above 50 points indicates growth and one below it indicates contraction.
A statement by Markit Economics, the financial information company which compiles the PMI, attributed the increase to rising output growth and new orders.
“Activity in the manufacturing sector picked up again, led by faster output growth and a further uptick in new orders, which led to a faster increase in backlog of work as companies struggled to keep up with demand,” said Leif Eskesen, chief economist for India & Asean at HSBC.
And, depletion of final goods inventories continued, which suggests output growth is likely to hold up in coming months, he said.
The stock of purchases grew moderately, though there was a slight dip in post-production inventories.
The growth in new orders is also at a high, including export orders. The launch of new products and the rise in demand is said to have resulted in the rise in incoming new work. However, the backlog of work in December was higher because of frequent power cuts.
The manufacturing PMI is based on a survey of about 500 large private companies. It showed that although there was a rise in job opportunities, 91 per cent of the companies monitored did not show any increase in the number of staff, while five per cent did.
PMI purchasing activity has been expanding continuously for 45 months. Input prices, too, have been rising, leading to a rise in the average selling prices.
Eskesen said there was no significant drop in the inflation rate and inflationary pressure was likely to remain firm in the coming months.
While the manufacturing PMI in November was at a five-month high, the index for services fell to a 13-month low of 52.1 points, versus 53.8 points in October. The tertiary sector constitutes the bulk of the economy. The services PMI for December is slated to come on Friday. The past few days have witnessed worrisome macro-economic data.
While the current account deficit touched a record of 5.4 per cent of GDP in the second quarter of the current financial year, against 4.2 per cent in the corresponding period last year, the government’s cumulative fiscal deficit in the first eight months totalled 80 per cent of the budget estimate for the entire year.
Eight core industries, having a weight of 38 per cent in the Index of Industrial Production (IIP), rose just 1.8 per cent in November.
Hence, if there is to be a boost in November’s industrial growth figure, the other 62 per cent will have to rise significantly. IIP growth in October was 6.5 per cent and any break would dash the theories of “green shoots of recovery”.