What explains the resilience of Indian manufacturing

livemint.com:

The Manufacturing Purchasing Managers’ Index (PMI) shows India as the only large economy whose factory output is growing significantly. How are the other global economies doing, and what is driving India’s manufacturing? How credible is PMI as a measure? Mint explains. It is robust.

The PMI, which measures the state of manufacturing through the prism of purchasing managers, was at 57.8 in June, slightly lower than 58.7 in May (which was a 31-month high). A PMI of above 50 means expansion or growth compared to the previous month while lower than 50 means contraction. In what is seen as a clear sign of resilience in India’s factory sector, the manufacturing PMI has been above 50 for 24 straight months.

This performance has led to an increase in business confidence and optimism around future business activity among the industry. PMI is seen as a significant measure of manufacturing (it also measures the services sector) the world over as it is elaborate and frequent. It surveys purchasing managers in 500 manufacturing companies (in India across 19 industries).

Conducted monthly since March 2005, it tracks five major areas — new orders, output, employment, suppliers’ delivery time and stock of items purchased. It helps analysts and economists to correctly anticipate the changing economic trends in GDP, inflation, employment and industrial production. S&P Global, a financial information and analytics firm, compiles the index in India.

Factory output is the highest in 18 months and hiring has grown for the last 3 months. Strong demand both within India and outside meant sharp improvements in production, sourcing and recruitment. Experts attribute this to government spending, especially capital expenditure, and a strong