India’s manufacturing PMI expands

Activity in India’s services sector increased for the fourth straight month in January as the Covid vaccinations roll out drove business optimism, a private survey showed on Wednesday. The IHS India Services Business Activity Index increased to 52.8 in January from 52,3 in December, suggesting the pace of growth was moderate. 

The 50-point mark detached expansion from contraction. But it should be marked that the PMI is a month over month indicator, showing improvement over the previous month and from a year earlier.

The scenario of business volumes:

“The Indian services sector enjoyed good levels of activity in January, with new business volumes rising for the growth fourth successive month and growth rates for both measures picking up from December,” said Pollyanna De Lima, who is Economics Associate Director at 1HS Markit. “The service department looks set to sustain growth and confidence towards hiring may improve as COVID concerns diminish,” De Lima added. 

Though the speed of growth began accelerating in December, the headline figure remained below its long turn average of 53.3 and was consistent with a moderate rate of change, the survey said.

The data comes an intermediate time of days after finance minister Nirmala Sitharaman presented a growth-oriented budget for 2021, focusing on increased spending to rescue the economy from the impact of the pandemic. The fiscal deficit has been marked at 9.5 per cent of GDP for FY21 and 6.8 per cent for FY22. The economic survey has estimated economic growth at 11 per cent for FY22. 

Discounting of price:

According to the PMI survey, the rise in new business continued to be driven by the domestic market even as the existing export work dropped further as travel restrictions and the COVID pandemic dampened international demand for services.

Price discounting strategies helped in the growth of total new orders. Marketing efforts that block the reopening of some establishments and strong demand support the increase in sales. Goods and services tax collection touched a record high of Rs 1.19 million in January.

Talking about the inflation, input costs increased for the seventh time from the starting of 2021, with several monitored companies reporting higher prices for fuel and a wide range of materials and other kinds of stuff. According to Lima, the main area of concern is the high-cost rise across the services sector, with the rate of inflation remaining above trend despite easing from December. 

Fall in employment:

Besides, higher costs have prevented firms from taking on additional staff, with the PMI survey showing a second successive fall in employment. As we advance, service providers were confident of a hike in output in the coming 12 months based on beliefs that the rollout of Covid vaccines would underpin demand growth and improvements on the broader economy. 

The overall amount of optimism was at an 11-month high. Looking forward, service providers are highly confident of a rise in output in the next 12 months. Positive sentiment is being supported by beliefs that the rollout of Covid vaccines would underpin demand growth and improvements on the broader economy. The overall degree of optimism is at its 11-month high. 

Role of PMI outbox index:

Meanwhile, the seasonally adjusted IHS Markit India Manufacturing Purchasing Managers Index released on Monday showed that manufacturing activity rose the fastest in three months at 57.7 in January compared to 56.4 in December. 

The Composite PMI Outbox Index, which accounts for both manufacturing and services, edged up to 55.8 in January from 54.9 in December as business activity across the private sector expanded at a marked and accelerated pace at the start of 2021.” At 55.9 in October, the seasonally adjusted IHS Markit India Manufacturing Purchasing Managers Index PMI was recorded at 53.7 in September.