India: Economic conditions improve in August
September 15, 2017
India’s manufacturing sector gained considerable steam in August, as the effects of the implementation of the goods and services tax (GST) began to fade. The manufacturing Purchasing Managers’ Index (PMI), published by Nikkei and IHS Markit, jumped from July’s 47.9 to 51.2. As a result, the manufacturing PMI climbed above the crucial 50-threshold that separates contraction from expansion after dipping below it in July.
Looking at the details, output and new orders both returned to growth in August. This, in turn, prompted businesses to hire additional staff and more inputs. Input cost inflation eased considerably, as the new tax regime caused the prices of some raw materials to fall. Overall, the downturn recorded in the previous month due to the introduction of the new tax regime was partially reverted. Consequently, firms remained positive although business confidence fell to an 11-month low as they grew more worried about possible future unexpected policy decisions.
Meanwhile, the Nikkei services PMI also improved, rising from 45.9 in July to 47.5 in August. Output and new orders continued to fall, but at softer paces than in July. As a result of the further contraction, firms downsized their staffs and downgraded their overall sentiment.