After the purchasing managers’ index (PMI) for manufacturing climbed to a three-month high of 55.0 in May, India’s services sector seems to have outdone that expansion with its PMI at 59.8, the highest in six months.
The big margins by which these exceed the 50-mark—which separates expansion from contraction—signals a strong performance. Not only has activity held up in the face of the West Asia crisis, the economy may have gained some momentum.
For this, thank India’s domestic economic drivers, which may have more than offset export headwinds. Interestingly, input cost pressures eased in May. This is counter-intuitive, given broadly costlier energy. Nevertheless, it provides businesses some leeway to defend margins as high global oil prices start to filter through into commercial endeavours.
That said, the path ahead is challenging, as was reflected in the business outlook index, which slipped for the second straight month. With hostilities in West Asia flickering up again, uncertainty prevails over energy imports. When supplies regain normalcy is anybody’s guess. But for now, last month’s PMI readings suggest that India’s economy hasn’t taken too hard a hit.