Manufacturing seems to be on a roll

The big margin by which the PMI exceeded the 50 mark, which separates expansion from contraction, suggests a boom in factory orders.  (AP)
The big margin by which the PMI exceeded the 50 mark, which separates expansion from contraction, suggests a boom in factory orders. (AP)

Summary

  • Fiscal 2023-24 ended on an upbeat note for India’s economy, going by the purchasing managers’ index (PMI) for the manufacturing sector, which hit a 16-year high in March. Alas, actual production data doesn’t show a factory boom that may enlarge this sector’s share of GDP.

The last fiscal year ended on an upbeat note for India’s economy, going by the purchasing managers’ index (PMI) for the manufacturing sector. It hit a 16-year high of 59.1 in March, the highest level since February 2008. The big margin by which it exceeded the 50 mark, which separates expansion from contraction, suggests a boom in factory orders. 

That this reading has been in expansionary zone now for 33 months on a roll is a sign of sustained strength. While new orders rose sharply, manufacturers also reported a build-up of stocks last month in anticipation of stronger sales. Other indicators such as surging GST intake or freight figures present a similarly bright picture. 

That said, although business optimism has been found to be high in surveys of managers, whose reports are what go into PMI readings, actual production numbers, as revealed in the recent national accounts data released by the government, are yet to reflect such a boom in factory activity. Sure, India’s overall pace of economic growth has been a succession of surprises on the upside, lately, but we still await clear signs of a manufacturing upsurge of the kind that would raise this sector’s share of GDP.

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