Opinion
Mint Quick Edit | Slightly slower manufacturing isn’t a worry
Summary
- September saw manufacturing in India slow, according to the HSBC purchasing managers’ index for the sector, and global headwinds amid geopolitical tension could mean sub-7% GDP growth in 2024-25. But then, RBI may soon get space for a policy response.
September saw manufacturing activity in India slow, with the HSBC purchasing managers’ index (PMI) for the sector, as compiled by S&P Global, declining to 56.5 from 57.5 in August. This was the weakest reading in eight months, but still comfortably above the 50 level that separates expansion from contraction.
The broad takeaway: while expansion has slowed, it remains robust. That said, headwinds have emerged in the external sector as demand for Indian exports weakens amid troubles in a global economy weighed down by geopolitical tension.
Also read: Growing jobs, tepid output: Contrasting story of manufacturing sector in charts
This puts pressure on the broader Indian economy, whose output growth slowed to 6.7% in the three months ended June. While this sub-7% reading was on the back of last year’s high base, the Reserve Bank of India’s 7.2% growth forecast for 2024-25 may be slipping out of sight. The Economic Survey’s range of 6.5-7% looks likelier, especially if there’s no relief from global conditions.
Thankfully, with inflation in August clocking under RBI’s target of 4% for the second month in a row, the space for a monetary policy pivot to support growth is likely to expand. Yet, RBI may stay in wait-and-watch mode until it’s sure of price stability.
