Nikkei’s latest India Manufacturing Purchasing Managers’ Index (PMI) points to a fair bit of buoyancy in the Indian economy. Boosted by new orders, business activity in India’s manufacturing sector expanded at the fastest pace in more than a year in February. India's Manufacturing PMI rose to a 14-month high of 54.3 in February, from 53.9 a month ago. A reading above 50 indicates expansion, while one below points towards a contraction.

(Naveen Kumar Saini/Mint)

Of course, the PMI reading is in sharp contrast to last week’s GDP data for December quarter. While one may argue that the GDP reading is dated, the fact that the Central Statistics Office (CSO) has revised its FY19 GDP growth forecast from 7.2% to 7% clearly means that not everything is hunky-dory. Hence, investors should not get carried away by the headline numbers. Besides, other high frequency data, such as automobile sales, don’t point to a recovery either, shows Mint’s Macro Tracker.

Indeed, in the PMI survey, an indicator of business expectations, the Future Output index, slid to 55, the lowest since February last year.

To be sure, the fiscal stimulus announced in the interim budget and the recent rate cut by the Reserve Bank of India (RBI) will have some positive impact on manufacturers’ businesses. However, for now, other factors, such as election-related uncertainty and fears of a global slowdown, could be weighing on business optimism.

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