GS Paper III

News Excerpt:

According to the latest survey released by S&P Global, the purchasing managers index (PMI) fell to 55.5 in October from 57.5 in September, 2023.

More details on news

• The survey shows that the business confidence slipped to a five-month low amid concerns surrounding inflation and demand.
• This comes amid a slowdown in global trade due to slower growth in major economies and persistent inflation, financial vulnerabilities and geopolitical tensions in the Middle East and Ukraine.
• The survey pointed to the rate of job creation being the slowest since April, with 4% of companies hiring additional people and 95% not hiring new staff.

About PMI:

The PMI data are compiled by S&P Global for more than 40 economies worldwide. 

How is PMI data interpreted?

• A PMI figure above 50 signifies expansion, while below 50 signifies contraction.
• India's services PMI has held firm in the expansion zone every month since August 2021, its longest such stretch since August 2011. 
• India's manufacturing sector has also expanded every month in the past two years.

Role of PMI in Indian economy:

• Indicator of economy: It is an important economic indicator as it offers a snapshot of the  manufacturing and services sectors, which are crucial components of India's economy.
• Employment decision: It helps in making employment decisions. For example, rising PMI can lead to increased hiring.
• International Comparisons:  India's PMI data can be compared to that of other countries, providing insights into its global economic competitiveness and relative performance.
• Making business decisions: It helps the manufacturing and services industries to make informed decisions about production, inventory management, and employment.
• Used by Investors: PMI data is used by Investors and financial institutions to assess the economic conditions in a country.

Way Forward:

The PMI data for India is significant for various stakeholders. To maximize its usefulness, it's important to address data quality, promote data interpretation, and supplement it with other economic indicators for a more holistic view of the Indian economy.