India’s economic activity is solid but hurdles galore
HSBC Flash India Composite PMI output index rose to a near 14-year high of 62.2 in April from 61.8 in March. The composite index is a weighted average of manufacturing and services business activity index. A reading above 50 indicates expansion.
The manufacturing PMI stood at 59.1 in April, the same as in March, while the services PMI rose to 61.7 from 61.2 in March. Survey participants attributed this expansion to buoyant demand from both domestic and external clients. The composite new export orders index rose at the fastest pace since the series started in September 2014.
Coming on the back of global economic weakness and sticky inflation, this, possibly, means Indian businesses were able to provide more value for money to the global customers. The manufacturing output index, a sub-index within manufacturing PMI, remained at 63.3 in April, almost the same as in March and up from 57.2 in January. Manufacturing activity is supported by better delivery time, possibly a result of reduced logistics bottlenecks.
In fact, economists at the International Monetary Fund (IMF) recently lauded India’s emphasis on capital expenditure (capex) spending in building airports, roads, railroads and so on. Improvement in business activity has also resulted in more hiring and job creation with the manufacturing sector increasing its workforce at the highest rate in the last about one-and-half years. From India’s perspective, manufacturing sector growth is more critical to provide employment opportunities to its vast population and wean people away from low-productivity agriculture.
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