Here Are Highlights Of The Indian Manufacturing Purchasing Managers' Index For March 2023

In a recent report, India’s manufacturing Purchasing Managers’ Index (PMI) for March 2023 surged, marking a significant improvement from February 2023. The rise in manufacturing activity to 56.1 can be attributed to an increase in both domestic and foreign demand for Indian goods. Despite being subdued compared to historical levels, new export orders witnessed growth in March 2023, which is expected to brighten the mood of policymakers.

PMI Highlights

• Thriving Services Sector – While the manufacturing sector has taken a backseat in recent months, services activity continues to reach new heights. Data released last month showed that the services PMI reached a 12-year high of 59.4 in February 2023. This robust performance is complemented by the strong manufacturing PMI data, which further bolsters India’s economic outlook.
• GST Collections Reflect Economic Recovery – The positive manufacturing PMI data comes on the heels of the government announcing that India’s total Goods and Services Tax (GST) collections rose to Rs.1.6 lakh crore in March 2023. This is the second-highest level since the new indirect tax regime was introduced in July 2017, signaling a steady recovery in the economy.
• Capacity Pressure Remains Mild, Affects Job Creation – Despite the expansion in manufacturing output, S&P Global’s survey revealed only mild pressure on capacity. Companies reported abundant capacity among themselves and their suppliers, leading to marginal expansion in pending workloads and hindering job creation.
• Easing Input Cost Inflation Benefits Manufacturers – Input cost inflation eased to its second-lowest level in two-and-a-half years, allowing manufacturers to add to their inventory of raw materials and semi-finished items at one of the highest rates in over 18 years. Selling prices increased in March 2023 at a rate similar to that seen in February 2023, with several panelists leaving their fees unchanged to boost sales.

Insight

India continues to grapple with high retail inflation levels, with Consumer Price Index (CPI) inflation at 6.44% in February 2023. The elevated inflation levels have sparked expectations of another repo rate hike by the Reserve Bank of India’s Monetary Policy Committee, which is set to announce its interest rate decision on 6 April 2023. The current policy repo rate stands at 6.5%, having been raised by 250 basis points in 2022-23.

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