Amid the economic gloom, India’s Purchasing Managers’ Index (PMI) readings have come as a whiff of fresh air. The services sector PMI rebounded to a one-year high of 53.8 in July (a reading above 50 marks an expansion) from June’s 49.6 on the back of strong growth in orders. This followed a similarly healthy 52.5 reading in July for the manufacturing sector. These suggest the worst may be behind us.

Still, caution is warranted. That’s because these signals of a revival aren’t echoed by other indicators. Bank credit, for instance, has weakened, car sales are on a slide, industrial production has slumped, and core output is anaemic. In addition, some industry leaders have complained of sluggish conditions. Thankfully, the government has taken note of the problem and its discussions with investors and business representatives may yield something positive. Also, the Reserve Bank of India looks set to cut interest rates by at least a quarter percentage point. If this is accompanied by focused efforts to improve policy transmission, it could aid a recovery. That action be taken is crucial. Until then, it would be premature to speak of a turnaround