Factory Activity in India rises on Stronger Demand

As per the Nikkei Manufacturing Purchasing Managers? Index (PMI), India’s PMI increased to 52.5 in July from June?s 52.1. This increase in India?s factory activity observed in the month of July can be attributed to the rise in domestic demand and has motivated the firms to increase their hiring at the fastest rate observed in the past 5 years.

What has happened?

• The Nikkei Manufacturing Purchasing Managers? Index (PMI) is complied by the IHS Markit, a private global research powerhouse.
• A Purchasing Managers’ Index (PMI) is used as an indicator of the economic and productive health of the manufacturing sector.
• The Index comprises of five major indicators: new orders received, current inventory levels, production done, supplier deliveries and the employment environment in the firm.
• For India, the PMI has remained above the 50-mark for two years which has separated contraction from growth.

What did the data show?

• The data shows that new orders which are a measure of the overall demand have increased at the fastest pace in July and that has helped boost factory output.
• However, the growth in foreign demand has slowed and is at its weakest rate in 15 months.

Why overseas demand has slowed?

The overseas demand has reduced due to slower global trade flows. This has underscored the broadening impact of international tariff tensions, like the US-China Trade row.