Quick Take | Slowdown? What slowdown?

Manas Chakravarty Moneycontrol News

On the day the Monetary Policy Committee (MPC) announces its monetary policy stance, the numbers from the Nikkei Purchasing Managers’ Index for India, a monthly survey of economic activity in the country’s private sector, show a buoyant economy.

The seasonally adjusted Composite PMI, a gauge of economic activity for the manufacturing and services sectors, saw a jump to 54.5 in November from a robust 53 in October. That’s the highest reading in the yardstick since October 2016. The PMI measures the month-on-month increase/decrease in economic activity with a reading above 50 denoting expansion from the previous month, while one below 50 indicates contraction.

Given below is the performance of some of the various sub-indices that make up the Composite PMI:

• Overall improvement: Both manufacturing and services are doing well. The manufacturing PMI rose to 54 in November from 53.1 in October, the strongest reading in almost a year. Services PMI rose from 52.2 in October to 53.7 in November, the highest reading since July.


• New business: New orders in the manufacturing sector in November grew at the second-fastest pace since October 2016. In services, new business growth was the fastest in over two years. That augurs well for the future. In manufacturing, the pace of expansion registered in November was one of the fastest in the past six years. The sharpest rise was noted in consumer goods, followed by capital and then intermediate goods. In the services sector, although employment increased, the pace lost momentum.


• Input price growth in manufacturing moderated to a seven-month low. In services, the rate of input price inflation was the slowest since April.


• Output prices: Factory gate prices rose for the 16th month in succession during November and at the sharpest rate since February 2017. But while November data signalled a further increase in prices charged for the provision of services in India, the rate of inflation was slight. The RBI will need to take into account the rate of inflation in output prices as the economy improves and core inflation rises.


• Business expectations in both manufacturing and services were at a 20-month low in October. They improved a bit in November, but remained muted by historical standards. Confidence was boosted by anticipated gradual improvements in market conditions, which some firms noted was likely to happen after the elections.