India's manufacturing sector is in "good health", as per high-frequency indicators, according to Chief Economic Adviser V Anantha Nageswaran.
Speaking to reporters following the release of GDP data for October-December on February 28, Nageswaran said one needed to take a step back from the quarterly numbers.
"In India, we must always remember that since the quarterly data are not seasonally adjusted, quarter-on-quarter changes need to be looked at with a considerable amount of caution," Nageswaran told reporters.
"Manufacturing, on the face of it, appears to have slowed down in real terms because of the rising input costs, etc. But if you look at the PMI (Purchasing Managers' Index) indicators, the manufacturing sector is in good health."
"And the performance of the eight core industries in the month of January also tells us that we do have a fairly robust manufacturing growth rate in the fourth quarter," the chief economic adviser added.
As per data released by the statistics ministry on February 28, gross value added (GVA) of the manufacturing sector contracted by 1.1 percent on a year-on-year basis in October-December following a 3.6 percent contraction the previous quarter.
On the whole, India's GDP growth slowed down to 4.4 percent in October-December from 6.3 percent in July-September.
Data released earlier today on February 28 showed core sector growth hit a four-month high of 7.8 percent in January, while India's manufacturing PMI has been above 50 for 19 months in a row.
A PMI reading above 50 indicates expansion in activity, while a sub-50 print is a sign of contraction.
However, the most recent PMI number for January, at 55.4, was the lowest in three months.
"I think I wouldn't read too much into this," Nageswaran said about the manufacturing numbers in the GDP data.
"I would say there are as many numbers of indicators that are pointing to continued robust activity as this data, and some of them are more high-frequency indicators," he said, adding that he maintained the GDP growth forecast of 6.5 percent for 2023-24, made in the Economic Survey last month.
While the government's top economist was confident about the GDP numbers, private-sector economists are not so sure.
"While moderation in GDP growth in October-December was expected, the continued contraction in the manufacturing sector comes as a negative surprise," noted Rajani Sinha, chief economist at CareEdge.
"Manufacturing has been a drag, contracting year-on-year in both July-September and October-December...which is partly due to the slowdown in exports arising from the global environment," said Suman Chowdhury, Acuité Ratings & Research's chief analytical officer.
Meanwhile, Rahul Bajoria, chief India economist at Barclays, said slower global demand is "likely to continue to impact India's manufacturing and export growth."
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